The Pound (GBP) made gains against both the Euro (EUR) and US Dollar (USD) on Tuesday as news from the Eurozone weighed on the single currency and as concerns over global economic growth weighed upon the ‘Greenback’.
Sterling was softer early in the session against the US Dollar and other peers as a report showed that UK Government borrowing increased to £11.8 billion September, an increase of £1.6 billion compared to the same time as the previous year. Economists had been expecting borrowing to remain steady.
The weakness of the global economy, poor wage growth and the creation of poor paying jobs have had a negative impact on the government’s tax income. In order to fill the gap more cash has had to be borrowing.
‘We have seen stronger growth in receipts this month, but as today’s figures show, the impact of the great recession is still being felt in our economy and the public finances. At the same time, we have to recognise that the UK is not immune to the problems being experienced in Europe and other parts of the world economy,’ a Treasury representative said.
ECB Plans Weigh on Euro
Sterling then made gains against the Euro after Reuters reported that the European Central Bank is examining plans to purchase bonds issued by companies or corporate debt in an effort to help stimulate growth and increase the Eurozone slow inflation rate.
The report also said that the bank could introduce the new stimulus plans as soon as December and start the bond purchases by early next year.
Following the news the Euro fell as economists raised their bets that the ECB will introduce a full-scale quantitative easing programme.
‘We’ll eventually get quantitative easing from the ECB. Whether he buys government bonds or corporate bonds or asset-backed securities or gets rates more negative than they are, it’s not clear that any of that’s going to make bank lending pick up,’ said a global strategist at Societe Generale in an interview with Bloomberg.
Also weighing upon the Euro was a report, which showed that the Eurozone’s level of government debt reached a record high in 2013, highlighting the EU’s difficulties in reining in public spending.
US Dollar Weakened by Global Growth Concerns
The US Dollar softened against the Pound and other peers as concerns that the weaker global economy could drag upon the US economy. Concerns over the health of the global economy were further highlighted early in the session when data out of China showed that the world’s second largest economy looks set to miss its growth target of 7.5%.
A report also showed that US Chain Store Sales fell from 3.8% to 2.1% on a yearly basis in the week ending October 15.
Further losses were restrained after a separate report showed that US Existing Home Sales increased by 2.4% in September, a sharp rally from the -1.8% recorded in the previous month.
UPDATE
The Pound Sterling to Euro exchange rate is currently trending in the region of 1.2642.
The Pound Sterling to US Dollar exchange rate is currently trending in the region of 1.6076.
As traders await the publication of the Bank of England minutes from their most recent policy meeting the Pound has gradually softened against the majority of its most traded currency rivals.
A complete lack of European data on Wednesday is likely to see the single currency depreciate against its major peers. As traders weigh-up the possibility of the European Central Bank initiating further stimulus measures the Euro is likely to decline over the course of the day.
It is likely that the US Dollar will remain fairly static ahead of the key inflation data due on Wednesday afternoon.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.6158 ,
Pound Sterling,,Euro,1.2682 ,
Pound Sterling,,Australian Dollar,1.8329 ,
Pound Sterling,,New Zealand Dollar,2.0206 ,
US Dollar,,Pound Sterling,0.6188 ,
Euro,, Pound Sterling ,0.7885 ,
Australian Dollar,, Pound Sterling ,0.5453 ,
New Zealand Dollar,, Pound Sterling,0.4945 ,
[/table]
