Strong public sector borrowing figures boost pound

Some positive data on Friday stemmed the tide of pound losses, with public sector borrowing data providing some ten-year records.

The pound has left the starting blocks today on positive form against the euro, with GBP/EUR rising 0.3% to €1.1219. GBP/USD has remained stagnated US$1.3190, GBP/AUD is stuck at A$1.6865 and GBP/NZD at NZ$1.8909. GBP/CAD, meanwhile, has climbed 0.2% to C$1.6658.

Read on to see what helped the pound recoup Thursday’s losses at the end of the week...

What’s been happening?

The pound was able to recover Thursday’s losses against the euro and US dollar thanks to better-than-expected public sector borrowing figures on Friday. The data revealed that smallest deficit for a September since 2007, while year-to-date borrowing was also at a ten-year low.

Hopes of a positive outcome from the Brexit negotiations also supported the pound higher. Markets had been pessimistic at the beginning of last week, as it emerged the UK government was preparing for the talks to collapse. But Friday saw reports that EU leaders were preparing to discuss the possibility of beginning trade talks in December; providing the UK settles the contested divorce bill.

Positive German producer price figures and Eurozone current account data failed to support the euro on Friday, allowing GBP/EUR to remain in positive territory. Despite the price growth signalling that inflationary pressures in the Eurozone’s largest economy continue to build, this wasn’t enough to drastically change the outlook on either the economy or monetary policy in the currency bloc.

Strong US home sales data gave markets a reason to feel positive about the US dollar on Friday, yet the pound remained the stronger of the two currencies. Even hopes that President Donald Trump is getting near to enacting his promised tax reforms was not enough to push the pound below opening levels.

What's coming up?

Today’s Confederation of British Industry (CBI) data will give more information on whether UK industry has benefitted from the weakened Sterling exchange rates since the referendum. Orders are expected to have picked up, which may lend the pound some support.

Eurozone consumer confidence for October this afternoon is expected to show that consumer sentiment edged higher, although it is still forecast to remain in negative territory overall.

There is nothing particularly impactful on the US data calendar today, but hopes of tax reform and of an interest rate hike in December could continue to slow the pound’s advance.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Reaz Rahman
Senior Dealer

Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.