- Pound (GBP) rises after 5 days of losses
- UK Government budget surplus hit £16.7bn
- Euro (EUR) falls ahead of consumer confidence data
- PMI data is due tomorrow
The Pound Euro (GBP/EUR) exchange rate is rising, snapping a 5-day losing run. The pair fell -0.01% in the previous session, settling on Tuesday at €1.1680 and trading in a range between €1.1656 – €1.1700. At 11:00 UTC, GBP/EUR trades +0.04% at €1.1684.
The pound is pushing higher against the year as investors digest record fiscal service in what is widely being seen as a pre-budget boost for Chancellor Jeremy Hunt.
According to the Office of National Statistics, the UK saw its biggest budget surplus on record in January, with tax revenue exceeding spending by £16.7 billion, which was more than double the surplus a year earlier. This left the budget deficit in the first ten months of the current fiscal year at £96.6 billion, which equates to £9.2 billion less than the office for budget responsibility forecasts.
The figures came in following strong VAT, personal and corporation tax receipts, which lifted government income over the past ten months while spending was lower thanks to reduced debt interest costs and withdrawal of the energy support schemes.
This raises the possibility of Chancellor Jeremy Hunt announcing tax cuts in the spring budget on March 6th as he comes under pressure from conservatives to boost the popularity ahead of an election later this year.
The euro is climbing higher ahead of Eurozone consumer confidence data, which is expected to show that morale in the region improved slightly in February after falling again in January.
Economists expect consumer confidence to rise to -15.6, up from -16.1, but this still remains well below the historical average, which is not that surprising given the gloomy economic outlook and record-high interest rates. A stronger-than-expected increase in consumer sentiment could support an improving spending outlook. However, consumer confidence data doesn’t tend to impact ECB interest rate decisions.
Instead, investors will look towards the private sector PMIs on Thursday for further clues about the health of the eurozone economy.
Eurozone PMIs are broadly expected to improve but still remain in contraction territory as the European economy grapples with sluggish growth and a softening landscape.
