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GBP unsteady despite sharp narrowing of UK deficit

currency-newsGBP unsteady despite sharp narrowing of UK deficit
News that the UK government borrowed nearly -£3.5 billion less than expected in December failed to provide reliable support for Sterling yesterday against many of its peers.

The pound started today inching away from opening levels. GBP/EUR is up 0.1% to €1.1394, while GBP/USD has risen 0.2% to US$1.4035. GBP/AUD is bucking the trend somewhat with a -0.1% decline to AU$1.7494, while GBP/NZD is up 0.1% to NZ$1.9043, as is GBP/CAD at C$1.7407.

There’s plenty on the economic data calendar from the UK, Eurozone and United States to keep the GBP/EUR and GBP/USD exchange rates on volatile form today. Read on to find out everything that’s coming up…

What’s been happening?

The pound put on mixed performances yesterday and closed the day lower versus the euro but higher versus the US dollar.

More broadly, Sterling was on unsteady ground, with the morning’s release of UK public borrowing figures for December failing to give the pound the support it needed to press higher.

This was despite the fact that the deficit clocked in at just -£1 billion, significantly beating forecasts for a narrowing to only -£4.3 billion.

Record-high VAT receipts and an unexpectedly-large £1.2 billion credit from the European Union helped lower the overall shortfall, and put Chancellor Philip Hammond firmly on track to achieve his spending goals for this fiscal year.

However, GBP/EUR weakened thanks to a sharp climb in economic sentiment and confidence amongst business leaders in the Eurozone.

The latest ZEW current situation survey for Germany showed a rise in the index from 89.3 to 95.2, while the expectations index rose from 17.4 to 20.4.

The Eurozone economic sentiment index climbed from 29 to 31.8.

Meanwhile there was no US data of note, other than the Richmond Fed manufacturing index for January, which slumped further-than-forecast from 20 to 14.

The US government shutdown was ended after a single day when the Democrats agreed to pass an interim funding bill, but if the deadlock in negotiations remains for another two weeks then the White House administration will be back where it started and operations will have to close again.

What’s coming up?

Today sees the release of the UK claimant count rate and jobless claims change figures for December, as well as average weekly earnings, the ILO unemployment rate and the employment change figure - all for the three months to November.

Markets will be particularly interested by the latest average weekly earnings figures, as an acceleration in pay growth - combined with the recent slowdown in inflation - will ease the downward pressure on household budgets and could therefore see consumer spending increasing.

There is a slew of market preliminary PMIs for January covering France, Germany, and the Eurozone as a whole due shortly.

Forecasts are for minor weakening across the board, but as the results still remain firmly in growth territory, markets may not be too perturbed.

The US will also release market PMIs for January today, as well as the November house price index and the latest mortgage application figures for the week ending 19th January.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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