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According to Caxton FX senior analyst Duncan Higgins, the revelation by the Office for Budget Responsibility (OBR) of a downgrade of predicted economic growth was an expected one and therefore stock market reaction "has not been too pronounced".
The newly established OBR estimated the economy of the UK will expand by 2.6 per cent next year, lower than the former Labour government's March prediction of between three and 3.5 per cent.
Mr Higgins stated: "The figures are reflective of the upcoming budget cuts, which are likely to weigh on economic activity for some time."
A renewed public deficit forecast was also given by the OBR, which stated it will drop to 10.5 per cent of gross domestic product during the 2010-11 financial year.
Chancellor of the Exchequer George Osborne launched the OBR on May 17th to help him shape the Budget.
Posted by Chris Weaver
