- Pound (GBP) is falling after a flat finish yesterday
- UK public sector net borrowing hit £20.7 billion in June
- Euro (EUR) is falling with EU-US trade in focus
- The EU is prepared to implement countermeasures if required
The Pound-Euro (GBP/EUR) exchange rate is falling after a flat finish yesterday. The pair was unchanged in the previous session, settling on Monday at €1.1534. It traded between €1.1517 and €1.1569. At 11:30, GBP/EUR trades -0.18% at €1.1513.
# is falling amid rising concerns over the Domestic outlook after the government borrowed more than expected in June and as inflation lifted government debt costs.
Public sector net borrowing was £20.7 billion in the previous month, above the £16.5 billion forecast, marking the second highest amount for June on record. Furthermore, the high inflation reading of April had the effect of lifting inflation-linked government bond payments. As a result, the government’s debt interest bill was £16.4 billion in June, the third-highest since records began.
With a widening black hole in public finances, Chancellor Rachel Reeves is increasingly expected to hike taxes in the autumn budget. This may slow UK growth further, potentially prompting the Bank of England to cut interest rates more aggressively.
UK growth contracted in the previous two months, highlighting the challenges that the central bank faces.
The euro is rising despite A lack of concrete developments in EU-U.S. trade talks ahead of the August 1st deadline. Talks are currently underway in Brussels and Washington, and markets are growing increasingly nervous with this the final window ahead of next week’s hard deadline. Should talks break down, the EU is preparing a package of retaliatory measures against the US. However, this wouldn’t offset the impact of a 30% trade tariff threatened by Trump.
The eurozone economic calendar was quiet today; however, attention is some Thursday’s ECB rate decision, which central bank is widely expected to leave interest rates unchanged at 2%. The ECB it’s in wait-and-see mode, waiting to see whether a trade deal can be reached.