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Pound finds its feet as UK government borrowing strikes 11-year low

Philip McHugh April 25th 2018 - 2 minute read

The pound sought to rally on Tuesday as some better-than-expected borrowing figures helped to bolster the appeal of the beleaguered currency. 

Sterling appears to be struggling to find any momentum this morning however, with GBP/EUR unmoved at €1.1433, GBP/AUD and GBP/NZD holding steady at AU$1.8318 and NZ$1.9586 respectively, while GBP/CAD is muted at C$1.7927. Only GBP/USD is showing any real movement this morning having fallen back to $1.3941.

It’s set to be a quiet day in terms of economic data today, possibly hampering Sterling, especially if investors look towards the UK’s upcoming growth figures…

What’s been happening?

The pound appeared to be picking up some steam again on Tuesday as Sterling sentiment was buoyed by the publications of the UK’s latest public sector borrowing figures.

According to data published by the Office for National Statistics (ONS) the UK posted a surplus of £0.2bn in March, beating expectations that the government would have to borrow £1.1bn to balance the books last month.

However, it was the annualised figures that provided the real uptick in the pound yesterday as the ONS reported that annual borrowing fell to £4.2bn during the 2017/18 financial year, coming in well below government targets.

The tentative gains in the GBP/EUR exchange rate were also aided yesterday by the publication of Germany’s latest business climate index as it fell even lower than expected in April.

The continued fall in business sentiment continues to be another gloomy cloud looming over Europe’s largest economy, as it follows a plethora of data suggesting the German economy is likely to experience more modest growth in 2018.

Meanwhile the GBP/USD exchange rate was able to rally from a one-month low on Tuesday as the pairing threatened to fall below $1.39.

This uptick in GBP/USD came despite stronger-than-expected US consumer confidence figures and solid US new homes figures, with some analysts suggesting that the US dollar’s recent bullish run may have some to an end.

What’s coming up?

Amid a lull in economic data the pound could find itself sliding again today as focus turns towards the UK’s upcoming GDP report.

Friday will see the release of the UK’s first GDP reading for Q1, with Sterling likely to be met by losses if growth slowed from 0.4% to 0.3% as forecast.

The only major data release in the Eurozone today is scheduled to be the latest unemployment claims from France, with the euro possibly weakening if jobless claims rose again in March as expected.

Meanwhile the US dollar looks to be on track to advance again during today’s sessions with easing trade tensions between the US and China as well as the continued rise in US treasury yields likely to boost the appeal of the US dollar during a break in domestic data.

Written by
Philip McHugh

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