Will a widened UK budget deficit weaken the pound?
Philip McHugh November 21st 2019 - 2 minute read
- Pound under pressure ahead of UK public borrowing figure
- Weak German price pressures undermine euro
- Canadian dollar fails to benefit from inflation uptick
Rising public borrowing forecast to send GBP lower
The pound failed to take any encouragement from the first televised general election debate, remaining on a weaker footing yesterday.
GBP exchange rates could soften further this morning on the back of October’s public sector net borrowing figure, with forecasts pointing towards a widened budget deficit.
Evidence that UK fiscal conditions deteriorated at the start of the fourth quarter would add to existing worries over Brexit and the wider economic outlook.
Euro braces for dovish ECB meeting minutes
Underwhelming German producer price index data limited the appeal of the euro yesterday by pointing towards a continued lack of inflationary pressure within the Eurozone’s powerhouse economy.
In the wake of this disappointing showing the euro looks vulnerable to additional selling pressure as markets brace for the release of the European Central Bank’s (ECB) meeting minutes.
Cautionary comments could weigh on the single currency and boost the odds of future monetary loosening.
However, if the central bank appears willing to leave monetary policy on hold in the near future EUR exchange rates could rally.
Canadian dollar looks to employment data for support
Although Canada’s monthly consumer price index rebounded as forecast this was not enough to shore up the Canadian dollar on Wednesday.
As US crude oil stockpiles continued to swell and US-China trade tensions lingered the appeal of the commodity-correlated currency proved limited.
However, CAD exchange rates could improve this afternoon if October’s ADP employment change reading shows a solid increase on the month.
Upcoming Data:
Thursday, 21st November 2019
09:30 GBP Public Sector Net Borrowing
12:30 EUR European Central Bank Meeting Minutes
13:30 CAD ADP Employment Change
Written by
Philip McHugh