British Pound Sterling: UK currency soldiers on in admirable fashion despite pesky borrowing figures

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Published on Wednesday, 22 August 2012 09:33

Written by Sam Coventry

International Money Transfers at our sister site

Your morning news and commentary on what is driving sterling forward on the global FX markets this morning.

The pound sterling (Currency:GBP) is out-performing on the FX space this morning, despite a worrying set of figures that showed the UK government had to borrow more money than expected in July.

The pound Australian dollar exchange rate is half a percentage point for the better on Wednesday morning at 1.5131.

The pound euro exchange rate is 0.13 pct higher at 1.2668.


The pound dollar rate is 0.09 pct higher at 1.5798.

The Pound held above 1.57 against the U.S Dollar on Tuesday and pushed to a near three month high at 1.58 during the U.S session.

"The UK currency did weaken considerably versus the Euro, slipping back under 1.27, after a government report showed that the latest borrowing requirement was weaker-than-expected with a reported deficit for July compared with expectations of a small surplus," notes Adam Solomon at TorFX.

That said, other commentators are pointing to the fact that the past 24 hours have been very kind to the euro on the basis that investors are expecting some concrete action to be announced by the ECB on capping the borrowing costs of the most troubled Eurozone countries.

This optimism would appear to be more of a driver at present than domestic UK issues.

Nevertheless, the borrowing figures were worrisome as July is traditionally a strong month for the nation’s public finances due to a heavy schedule of corporate tax revenues.

Borrowing increased to £44.9 billion for the first four months of the year, compared with £35.6 billion the previous year.

"There will be increased pressure on the government for a shift in policies and there will also be fears over the AAA credit rating, as debt levels continue to rise sharply," suggests Solomon.

The Euro also moved higher versus the U.S Dollar and challenged resistance levels above 1.2380 through the day with a peak above 1.24.

There was continuing speculation that the European Central Bank was set to intervene aggressively in order to push peripheral bond yields down was record high levels.