Even for those beyond UK shores, today's budget should be of interest because austerity is the only game in town for many European countries and the UK is further down that path than most, at least in terms of implementation. There used to be a time when UK budgets were a closely guarded secret, but that's long gone. As such, even though the chancellor cannot afford any net fiscal give-aways, we know that some subtle shifts in the tax burden will be made. The Chancellor will be able to announce that borrowing for the current fiscal year, which ends this month, will be broadly in line with the forecast made a year ago, which contrasts with the fiscal slippage being seen in several other European countries. But the UK remains on a fiscal knife-edge, with the economy expected to grow by less than 1% this year. Sterling has been performing relatively well of late, in part helped by the UK's relatively comfortable fiscal performance but also helped by the changing dynamics of FX markets, which are shifting the focus away from carry and risk. From the sovereign risk, growth and policy viewpoint, sterling is perceived to be the better of the bunch, at least within Europe.
- The Saudis step up
- More Chinese growth concerns
- Return to UK inflation disappointment