UK Borrowing Hits £18.3bn as GBP/EUR Slips to 1.1652
Sterling weakened slightly against the euro after August deficit data exceeded forecasts by over 2 billion pounds.
Key points
- UK government borrowing in August hit £18.3bn, exceeding the £15.7bn market forecast.
- GBP/EUR traded at approximately €1.1652 as investors weighed the deficit data against strong manufacturing results.
- Falling oil prices helped lower UK gilt yields, easing pressure on government debt servicing costs.
The GBP/EUR exchange rate closed near €1.1652 on Tuesday. Sterling faced downward pressure following the release of new UK borrowing data.
Government borrowing reached £18.3bn in August. This figure was the second-highest recorded for the month and significantly above market expectations.
Deficit data exceeds forecasts
Traders had expected borrowing to be £15.7bn. The Office for Budget Responsibility had projected a lower figure of £14.8bn.
The larger-than-expected deficit raised concerns about public finances. Chancellor John Healey now faces a difficult task before the Autumn Budget.
Manufacturing data supports sterling
Sterling limited its losses after strong CBI manufacturing data. Falling oil prices also helped by reducing UK government borrowing costs.
Lower crude prices contributed to lower UK gilt yields. This reduced the cost of servicing government debt for the treasury.
Eurozone faces mixed signals
The euro traded unevenly due to political uncertainty in Germany. Tensions between the EU and Russia also weighed on the currency.
Investors await Wednesday’s preliminary PMI figures for the UK and Eurozone. ECB policymakers Vujčić and Lane will also speak on their views.
