Alejandro Zambrano, currency analyst at FXCM, gives his views on the reaction to chancellor George Osborne's Budget.

'Retail FX traders viewed George Osborne’s forecast for a lower UK GDP growth and high inflation for 2011 as a bad combination and not supportive for a stronger pound sterling.

'The health of UK’s AAA credit rating is another major focus for traders, but we do not expect any credit rate changes by rating companies on today’s budget.

'On a more positive note, Osborne’s estimate that the deficit will reach £29 billion by 2015/16 from today’s level at £146 billion is supportive of the GBP.

“The minutes of last Bank of England monetary policy meeting were also published today and showed, as expected, that the Bank of England, much like the Federal Reserve, is focusing on growth instead of inflation.

'It’s clear that investors have not fully understood this and we except high volatility in the coming months as traders buy on anticipation of higher interest rates, which ultimately will not be delivered by Bank of England.

'The only winner in this game is the euro. EUR/GBP is expected to reach 0.89 within three months, with the EUR/GBP currently trading at 0.87.

'GBP is expected to strengthen against US dollar and will probably reach 1.67 as long as price trades above 1.5750, yet this move will be dominated by US dollar weakness and not GBP strength.'