- Pound (GBP) is rising after gains yesterday
- UK government borrowing hit almost £100 billion in April -September
- Euro (EUR) falls amid fragile political stability in France
- EZ economic calendar is quiet
The Pound-Euro (GBP/EUR) exchange rate is rising after losses yesterday. The pair fell -0.05% in the previous week, settling on Monday at €1.1511. It traded between €1.1498 and €1.15. At 16:00 UTC, GBP/EUR trades +0.1% at €1.1523.
The pound is pushing higher despite UK borrowing hitting a 5-year high in September. The UK government borrowed £99.8 billion in the period from April to September, which was £7.2 billion more than forecast in March by the Office for Budget Responsibility and £11.5 billion higher than in the same period in 2024.
This puts borrowing by the Labour government at the highest level since the pandemic, highlighting the challenge that Rachel Reeves faces next month in her Budget.
The Institute of Fiscal Studies said the overshoot was striking, given that the economy had grown faster than expected, and inflation had overshot the March forecasts, which would usually boost tax revenues.
Attention is now turning to UK CPI data due tomorrow, which is expected to show that inflation ticks higher to 4% year on year in September, up from 3.8%. This would be almost twice the Bank of England’s 2% target level. The BoE is not expected to cut rates again until next year.
The EUR is under pressure amid a quiet economic calendar, and as investors continue to digest the fragile economic stability in France.
French Prime Minister Sebastian Lecornu survived several votes of no confidence last week. However, structural fiscal challenges remain, which could limit the euro’s upside.
Meanwhile, ECB president Christine Lagarde’s recent remarks confirm a cautious stance from the central bank, emphasising that current rates will likely be maintained given that inflation is approximately in line with the ECB’s 2% target level.
The eurozone economic calendar is relatively quiet this week until Friday, when PMIs will come into focus and are expected to show the economy maintained modest growth in October.