Sterling rose to a three-week high against the euro on Thursday after UK public sector net borrowing came in lower than expected and on talk of European interest in buying British firms.
Public sector net borrowing was the highest on record but below the forecast, hence the rise. At 08:30am rates are as follows:
- GBP/EUR 1.1142
- GBP/USD 1.5185
- GBP/AUD 1.6472
- GBP/NZD 2.1300
- GBP/CAD 1.5447
- GBP/CHF 1.6015
- GBP/ZAR 11.098
- GBP/JPY 137.42
- EUR/USD 1.3617
The figures released yesterday indicated the budget deficit may come in below the government’s forecasts, and the better than expected news boosted the market. Finance minister Alistair Darling will deliver a budget next Wednesday, and we’ll then know more about the governments spending plans and how they plan to reduce the deficit.
However, Sterling’s outlook was weighed down by concerns about the UK’s budget deficit, heading for 12 percent of gross domestic product this year. Despite the brighter February public borrowing figures “it doesn’t change the big picture which is the UK must make big efforts to consolidate its budget deficit over the medium term,” said Philip Shaw, chief economist at Investec.
Chancellor Alistair Darling has pledged to halve the budget deficit in percentage terms over the next four years, but argues that making cuts now could harm the UK’s recovery from recession.
On Wednesday, the European Union published a report saying that the government’s plans to cut the deficit are not ambitious enough.
EU rules say government deficits must be below 3% of GDP, but the UK’s deficit is expected to hit 12.6% of GDP this year. The Conservatives also argue that cuts need to be made more quickly.
Ger – Producer Price Index
EU – Speech by ECB President
Can – Retail Sales
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