UK FISCAL: How much will Budget reduce headline inflation?
Nov-27 12:45
The answer depends on whether you read the Treasury's Budget document or the OBR EFO.
- From the Treasury: "The Budget package directly cuts inflation by 0.4 percentage points next year. This is the biggest near-term reduction in inflation due to government policy ever forecast by the OBR at a single fiscal event, outside of a crisis."
- From the OBR: "Government policy measures announced since March are expected to decrease inflation by 0.3 percentage points in 2026 (a peak quarterly impact of 0.5 percentage points in the second quarter of 2026)."
- We are more inclined to trust the OBR numbers here - but its a curious development (unless the Treasury are referring to FY26/27 - seems possible - but isn't explicit in the text).
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
SOFR OPTIONS: Morning Option trades
Oct-28 12:28
- SFRZ5 96.56/96.68cs, traded for 0.75 in 2.5k.
- SFRZ5 96.50/96.62cs, traded for 1 in 10k.
- SFRZ5 96.43/96.50/96.56c fly, traded for 0.25 in 5k.
- 0QX5 97.25/97.375 cs traded for 1 in 2.5k (block trade).
- 0QH6 97.00/96.62ps 1x2, traded for 8 in 1k.
FOREX: EURGBP Approaching Key Resistance at 0.8769
Oct-28 12:27
- Renewed pessimism for GBP has been on show Tuesday, amid increasing signs that UK Chancellor Reeves will have to raise income tax at the November 26 budget to fill a widening fiscal hole. Associated upward pressure on EURGBP (+0.31%) has prompted the cross to trade within 4 pips of key resistance and the bull trigger, located at 0.8769.
- Furthermore, the FT reported yesterday evening that the OBR is expected to cut its trend productivity forecast by 0.3pp, larger than the 0.1-0.2pp that had been expected by most analysts/independent forecasters and providing an additional sterling headwind.
- Moving average studies remain in a bull-mode position for EURGBP, highlighting a dominant technical uptrend. A break of 0.8769 would bolster bullish conditions, paving the way for a move towards 0.8835, the May 3 2023 high. The first support to monitor lies at 0.8685, the 50-day EMA.
- There is no tier 1 UK data this week which puts us at the mercy of external events and domestic fiscal headlines to some extent. In our latest Gilt Week Ahead, we round up the most relevant fiscal headlines, their impacts and their potential costs: https://mni.marketnews.com/3J8GNMl
OUTLOOK: Price Signal Summary - Fresh Cycle High In Gilts
Oct-28 12:15
- In the FI space, Bund futures are trading closer to their recent lows. The bear phase that started on Oct 17 is considered corrective and is allowing an overbought trend condition to unwind. Initial key support at 129.45, the 20-day EMA, has been breached. This exposes the 50-day EMA, currently at 129.08. For bulls, a reversal would refocus attention on the key resistance at 130.59, the Oct 17 high.
- A bull cycle in Gilt futures remains intact. The recent clearance of 93.17, the Oct 17 high, and a fresh cycle high high today, confirms a resumption of the uptrend and signals scope for an extension towards the 94.00 handle next and 94.24, a 1.618 projection of the Sep 3 - 11 - 26 price swing. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Note that the contract is overbought, a pullback would allow this condition to unwind. Firm support to watch lies at 92.27, the 20-day EMA.
