- Pound (GBP) falls after gains yesterday
- UK PSBN rose to £17.81 billion
- Euro (EUR) is rising despite Trump’s tariff threats
- ECB dovish commentary could limit gains
The Pound Euro (GBP/EUR) exchange rate is falling after modest gains yesterday. The pair rose 0.14% in the previous session, settling on Tuesday at €1.1845. It traded in a range between €1.1814 and €1.1853. At 19:30 UTC GBP/EUR trades -0.13% lower at €1.1830
The pound is falling against the euro as the market digests higher than expected public sector net borrowing.
The latest data from the Office of National Statistics showed that UK government borrowing rose by more than expected in December reaching £17.81 billion up from £11.8 billion in November and well above expectations of £13.4 billion. The figures highlight the fiscal challenge that chancellor Rachel Reeves is facing pressure on her to plan budget cuts for the spending review in the summer.
However in slightly more encouraging news Britain’s governments borrowing costs fell on Tuesday to their lowest level since the start of January’s sell off in bonds, as investors both here and in the US breathed a sigh of relief over Trump’s first moves since coming into office.
The 30 year gilt yields witch were the hardest hit in the bond sell off earlier this month sank to the lowest level since January 3rd at 5.139% .
Still the pound is struggling amid a weak economic outlook and on rising expectations that the Bank of England could cut interest rates at a faster pace than expected across this year.
The euro is holding steady against both the pound and the US dollar Donald Trump threatened trade tariffs on the European Union as well as China.
In response to Trump’s threats the European Union ministers have said that they should improve the block’s competitiveness rather than retaliate.
Gains in the euro also being limited by dovish ECB commentary. ECB policymaker Klass knot said he sees few obstacles to cutting rates again next week. The ECB are expected to cut rates by 25 basis points.
