- OBR forecasts budget deficit 15.2% of GDP and -35% GDP contraction Q2
- Trump threatens to cut ties with China
- US retail sales -12% mom in April
- At 07:30 UTC, GBP/USD -0.25% at US$1.2196 >> Real time exchange rates
The Pound is extending losses versus the US Dollar for a fifth straight session. The Pound US Dollar exchange rate settled on Thursday -0.02% at US$1.2228.
At 07:30 GBP/USD is trading -0.25% slipping through US$1.22 to a fresh 5 week low. The pair is on track to lose 1.5% across the week, its second consecutive week of losses.
The Pound is trading on the back foot following a report from the Office of Budget Responsibility which showed that the UK government borrowing was on course to reach £300 billion in 2020-21. This would put the budget deficit at 15.2% of GDP, the highest level since World War 2, as the government increases spending to keep the UK economy afloat during the coronavirus crisis.
The OBR warned that the actual figure is likely to be higher as it doesn’t include the extension of the government’s job retention scheme. Earlier this week Chancellor Rishi Sunak announced that the furlough programme will be extended to October, although with some contribution from employers. The scheme has so far cost £70 billion through to July.
The OBR also warned that the UK economy would contract -35% in the second quarter, whilst unemployment is expected to rise to 10%. These forecasts come after data this week showed that the UK economy shrank -5.8% in March, compared to February.
There is no high impacting data. Investors will continue to monitor coronavirus statistics whilst looking ahead to a full week of macro data releases next week.
The US Dollar is advancing versus the Pound as investors focus their gaze on rising US – Chinese tensions. President Trump has threatened to sever relations with China in the latest escalation of geopolitical tensions, as Trump looks to blame China for the coronavirus outbreak in the US and across the globe.
Looking ahead US retail sales and consumer confidence data could move the US Dollar. Analysts are expecting US retail sales to have slumped -12% month on month in April amid lockdown, down from -8.7% in March. April should be the bottom of the sales slump as the US economy starts to gradually reopen.
The data comes after figures yesterday showed that 2.98 million more Americans signed up for initial jobless claims. 36 million Americans have filed for unemployment insurance over the past 2 months.
