Budget and Fed statement to dominate Wednesday discourse

After a relatively sleepy start to the week in terms of actual news, Wednesday will kick things up a gear with a flurry of key announcements.

For much of the day focus will be on the UK: first this morning sees the latest rate vote from the Bank of England alongside unemployment data and the increasingly important wage growth figures. Yet this will be a mere amuse-bouche ahead of the Budget 2015 main course, with George Osborne set to announce coalition’s final real act of governance before the elections in May.

The majority of the chatter surrounding the Budget has been around ‘wiggle room’, namely how much of it Osborne actually has. Luckily for the Chancellor, oil and food-inspired lower-than-expected inflation looks like it will create a £6 billion windfall for the coalition, a stick Osborne is sure to try and beat Labour with if they attack the previously announced spending cuts that many forecasters claimed would see public spending at 1930s levels. With all this in mind, the FTSE has continued its positive run that began on Monday, with its modest gains being sustained, rather than the peak and plunge situation seen in the US and the Eurozone. However this recent stability may be challenged after lunchtime when Osborne reveals what’s in his big red box.

With the UK having a rare moment in the spotlight during the first half of Wednesday, the Eurozone is likely to take a back seat before the EU economic summit tomorrow. This may be in the region’s favour: the DAX’s record rally, in a move emblematic of the Eurozone as a whole, came to a screeching halt yesterday and continued its declines this morning; focus on the US and UK may give the Eurozone indices time to recalibrate.

Post UK Budget all eyes will turn to the US, as the Federal Reserve reveals its economic projections and latest interest rate statement this evening. Rate hike-ruminations have dominated the financial discourse in the US of late, and the markets have been jittery ahead of the big reveal tonight. The main discussion is whether Yellen and co. will drop the word ‘patient’ from their rate rise comments, and whether this eventuality would mean a raise in rates before the oft-talked about potential June date. After the Dow went the way of the DAX and lost most of its Monday gains yesterday, the US futures are fairly flat this morning; investors seem wary to make any moves before the Fed shows its hand later today.