The pound continues to grow amid expectations of aggressive monetary policy from the Bank of England, which struggles to combat high inflationary pressure that showed growth a month earlier. However, a positive report on the growth of business confidence in the United Kingdom in the first quarter of this year indicates optimism despite the fact that, according to the survey, only a third of companies see an increase in sales.
Data from the British Chamber of Commerce shows that persistently high inflation affects consumers’ spending decisions, which in turn impacts and increases companies’ expenses. This creates a headache for Chancellor Jeremy Hunt who relies entirely on economic growth to then increase tax revenues and help reduce public borrowing. In his recent budget plan for the coming year, Hunt promised strong economic growth and inflation around 2.0%. However, with current inflation at 10.0%, it is hard to imagine how this target can be achieved.
The report states that about 52% of businesses said their sales would grow over the next 12 months compared to 44% in the third quarter of 2022. However, only 34% of companies demonstrated sales growth in the first three months of 2022, while 47% of hospitality businesses reported a decrease in cash flow.
The figures indicate an improvement in business sentiment as political instability and inflationary pressure show some signs of easing. However, core inflation remains high which is a limiting factor for an overall improvement in business conditions.
It is worth mentioning that the survey was conducted before the budget was adopted last month, which includes stimulating business investment and offering three-year tax breaks to a number of firms investing in the industry. The report states that about 75% of respondents said they either maintained or reduced their investments in factories or equipment during the first quarter of 2023.
It is also reported that over the past six years, there has been no significant improvement in business investments. BCC Director General Shevaun Haviland said that Hunt’s new budget is not well-thought-out enough to shift the scale of business confidence growth. “The government has failed to address some of the fundamental issues hindering companies from realizing their potential, particularly the cost of energy carriers and the overheated labor market, which remain the main problems for businesses,” Haviland said.
“The new government support package represents an 85% reduction in financial assistance available to businesses. We reiterate our calls for increased targeted support for those firms that desperately need it,” the statement noted.
Regarding the technical picture of GBP/USD, bulls continue to control the market. To develop an uptrend, they need to stay above 1.2460 and break beyond 1.2520. Only breaking through this level will reinforce hope for further recovery to 1.2560. This will pave the way for the pound to surge to 1.2590. If the pair falls, bears will try to take control over 1.2460. If they are successful, a breakout of this range will undermine the bullish stance and push GBP/USD to a low of 1.2390 with the prospect of reaching 1.2330.
As for the technical outlook for EUR/USD, bulls still have every chance of continuing growth and retesting the March highs. To do this, they need to stay above 1.0930, which will allow them to break beyond 1.0975. From this level, they can climb to 1.1000 with the prospect of hitting 1.1035. In the event of a decline, I expect buyers to step in at only around 1.0920. If bulls show no activity there, it would be a good idea to wait until the price retests the low of 1.0880 or open long positions at 1.0840.
The material has been provided by InstaForex Company – www.instaforex.com
The pound continues to grow amid expectations of aggressive monetary policy from the Bank of England, which struggles to combat high inflationary pressure that showed growth a month earlier. However, a positive report on the growth of business confidence in the United Kingdom in the first quarter of this year indicates optimism despite the fact that, according to the survey, only a third of companies see an increase in sales.
Data from the British Chamber of Commerce shows that persistently high inflation affects consumers’ spending decisions, which in turn impacts and increases companies’ expenses. This creates a headache for Chancellor Jeremy Hunt who relies entirely on economic growth to then increase tax revenues and help reduce public borrowing. In his recent budget plan for the coming year, Hunt promised strong economic growth and inflation around 2.0%. However, with current inflation at 10.0%, it is hard to imagine how this target can be achieved.
The report states that about 52% of businesses said their sales would grow over the next 12 months compared to 44% in the third quarter of 2022. However, only 34% of companies demonstrated sales growth in the first three months of 2022, while 47% of hospitality businesses reported a decrease in cash flow.
The figures indicate an improvement in business sentiment as political instability and inflationary pressure show some signs of easing. However, core inflation remains high which is a limiting factor for an overall improvement in business conditions.
It is worth mentioning that the survey was conducted before the budget was adopted last month, which includes stimulating business investment and offering three-year tax breaks to a number of firms investing in the industry. The report states that about 75% of respondents said they either maintained or reduced their investments in factories or equipment during the first quarter of 2023.
It is also reported that over the past six years, there has been no significant improvement in business investments. BCC Director General Shevaun Haviland said that Hunt’s new budget is not well-thought-out enough to shift the scale of business confidence growth. “The government has failed to address some of the fundamental issues hindering companies from realizing their potential, particularly the cost of energy carriers and the overheated labor market, which remain the main problems for businesses,” Haviland said.
“The new government support package represents an 85% reduction in financial assistance available to businesses. We reiterate our calls for increased targeted support for those firms that desperately need it,” the statement noted.
Regarding the technical picture of GBP/USD, bulls continue to control the market. To develop an uptrend, they need to stay above 1.2460 and break beyond 1.2520. Only breaking through this level will reinforce hope for further recovery to 1.2560. This will pave the way for the pound to surge to 1.2590. If the pair falls, bears will try to take control over 1.2460. If they are successful, a breakout of this range will undermine the bullish stance and push GBP/USD to a low of 1.2390 with the prospect of reaching 1.2330.
As for the technical outlook for EUR/USD, bulls still have every chance of continuing growth and retesting the March highs. To do this, they need to stay above 1.0930, which will allow them to break beyond 1.0975. From this level, they can climb to 1.1000 with the prospect of hitting 1.1035. In the event of a decline, I expect buyers to step in at only around 1.0920. If bulls show no activity there, it would be a good idea to wait until the price retests the low of 1.0880 or open long positions at 1.0840.
The material has been provided by InstaForex Company – www.instaforex.com
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