Your weekly economic update from the team at FXD Capital


Rishi Sunak’s UK budget left me with more questions than answers. There are usually enough leaks in the preamble to budgets to make the final event seem more like a confirmation procession over a revelation. There have been rumours about raises to capital gains and income taxes (and even a new wealth tax) in the past couple of months. In the end, none materialised, and it leaves many questions about how the UK is going to pay for the increased spending incurred during the pandemic. Lackadaisical attitudes to money printing also bring an uncomfortable feeling against the backdrop of rising government bond yields.

With all the spending announced in the budget and the gap between concessions starting (such as corporation tax increases), it suggests that the government’s strategy is to roll the dice of economic recovery and hope that the rising tide lifts all boats.

I think the government has kicked the can down the road here, and the result with neither be sufficient for the country nor itself. Regarding the former, the increase of corporation tax to 25% by 2025 may not translate to increased tax collections, instead encouraging companies to reinvest cash flow for growth. Such a tactic has been the hallmark of technology companies over the past decade and has contributed to growth stocks’ success; Amazon, for example, has never paid a dividend. On the other hand, encouraging a more expansive, future-looking approach by dividend-hungry FTSE companies may benefit UK plc over the long-run, as they reinforce operations and invest for growth, over depleting reserves to pay out dividends. Plans will also be bolstered by the 130% “super deduction” of new asset investment.

For the government’s fortunes, the budget is a calculated gamble. If the economic revival succeeds and absolute returns reduce the deficit, it can enter the next election cycle on a wave. Yet, if it doesn’t, they will be backed into a corner and forced to make decisions they should have perhaps made now, at a time where there is less time for the electorate to forget the pain inflicted.


Away from the budget, which dominated the news, there were other noteworthy events in the UK this week. The sunset for LIBOR is nearing closer, as the FCA announced that figures for remaining currencies would cease to be published by the end of 2021.

Moves to make the FTSE more attractive for IPO listings in the face of increased competition have entered the lobbying phase between relevant parties. The argument relates to making more concessions on the use of dual-class shares and reducing minimum levels of free float. Deliveroo is mooted for a potential IPO soon; its status as a technology leader and desire to retain founder control through dual-class shares will provide an impetus for any shakeup.


Drama in the bond market continued this week, despite some early respite. 10-year yields touched upon 1.55% during comments by Jerome Powell at the Wall Street Journal Jobs Summit on Thursday.

Continual yield volatility is due to Fed sentiment remaining noncommittal towards changing course from the patient withdrawal of recovery support. Over recent weeks, there have also been issues with US Treasury liquidity, a $21 trillion market. Last Thursday, Primary Dealers (banks that underwrite US bond sales) were forced to pick up 40% of the sale of a new seven-year Treasury auction.


Europe provided some respite to the inflation narrative, as Eurostat’s flash estimate for January showed prices rising 0.2% on the month and 0.9% year-on-year. The delta between Europe and US figures will be pertinent in the coming months due to both regions being at disparate points related to lockdown conditions.

Continual lockdown restrictions and a struggling vaccine rollout take their toll, and recent data points to a double-dip recession in Europe. This week, Spanish unemployment hit a five-year high, and German retail sales fell for a second successive month.

All the best for the week ahead,



Our weekly column is written by Alex Graham, Economic Advisor to FXD Capital. Originally a bank treasurer, Alex’s weekly roundup intends to provide a conversational, top-down view of what is going on in world macroeconomics and how it impacts business on the ground level.

Would you like to receive FXD Capital’s Insights directly to your mail inbox? Click the button to subscribe to our email newsletters.

Subscribe to our weekly economic update


This document should be considered a marketing communication for the purposes of the FCA rules. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research.  The information given in this document is for information purposes only and is not a solicitation, or an offer to buy or sell any security or any other investment or banking product. It does not constitute investment, legal, accounting or tax advice, or a representation that any investment or service is suitable or appropriate to your individual circumstances.

You should seek professional advice before making any investment decision. The value of investments and the income from them can fall as well as rise. An investor may not get back the amount of money invested. Past performance is not a reliable indicator of future results. Investment returns may increase or decrease as a result of currency fluctuations.

The facts and opinions expressed are those of the author of the document, as of the date of writing and are liable to change without notice. We do not make any representations as to the accuracy or completeness of the material and do not accept liability for any loss arising from the use hereof. We are under no obligation to ensure that updates to the document are brought to the attention of any recipient of this material. Please note that this commentary may not be reproduced, distributed, disseminated, broadcasted, sold, published or circulated without prior consent from FXD Capital Limited.

FXD Capital Limited is registered in England & Wales (No. 11397216) with its registered office at 3 Lloyds Avenue, London, EC3N 3DS. FXD Markets Limited is registered in England & Wales (No. 11876665). FXD Markets is an FCA registered trading name of Kyte Broking Limited. Kyte Broking Limited registered in England & Wales (No. 02781314) is authorised and regulated by the Financial Conduct Authority (“FCA”) under FRN: 174863 with its registered office at 55 Baker Street, London, W1U 8EW. Kyte Broking Limited is a member of the National Futures Association (“NFA”) under NFA ID: 0288293.