Markets seem to be taking the budget well, as I expected. I wondered whether to cut my EUR/GBP trade because of the political risk, but reasoned that the budget was going to be about deficit reduction, and the markets were already expecting that and have given the GBP some credit for it. I see two risks. 1. The market decides GO is taking too long to cut the deficit — I think this is unlikely because really the important thing at present seems to be to have a credible plan; too much cutting and the market will fret about the effect on growth. 2. Split within the coalition. Most Lib Dems seem to be on board and the Tory right has hopefully been appeased by a fairly mild increase in corporation tax. But Campbell/Kennedy could still kick off, and you never know what the crazy wing of the Tory party will do.

CURRENT POSITIONS
Short EUR/GBP
Long Natural Gas

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