Update: after the GBP initially dropped on the lower GDP forecasts, it has since rallied after Hammond finished speaking, in what Citi said was a “relief rally” as there were no “banana skins and government safe. Relief trade here.”

This was a risk event – while Budget Announcements are normally quite quiet affairs in FX, the government is so weak that this could have been a banana skin. Fortunately, that was a good budget in political terms, and exactly what May needed. Economically speaking, the downgrade in GDP forecasts will attract some attention, but they were broadly expected, and Hammond’s big spending on the national healthcare and on housing will probably grab the headlines tonight (the rabbit-out-of-the-hat moment was the abolition of stamp duty for first-time home buyers below GBP300k). There were also extra funds for Brexit preparations and a positive tone about the process. May’s government will be thankful, and Chancellor should be safe.

Earlier:

The pound dropped, sliding to session lows, after UK chancellor Philip Hammond revealed a sharp downgrade (more than expected) to Britain’s economic forecasts during the presentation of the UK Budget, underlining the government’s challenge in transforming its political prospects and boosting growth as the country prepares for Brexit.

Hammond said that the UK has missed productivity predictions, once again falling disappointingly short. And, somewhat ironically, one of the Hammond’s first comments was to remark that the UK economy is “confounding those who talk it down” and that “those who underestimated the UK, do so at their peril”, suggesting the economy is doing better than its critics said it would be.