The US Dollar Pound (USD GBP) exchange rate trended higher on Tuesday morning as concerns over Trump’s presidency were offset by a rise in the UK’s public deficit.
According to data published by the Office for National Statistics (ONS) the UK’s Public Sector Deficit figures leapt from a downwardly revised -£2.45bn to -£10.4bn in April, with government borrowing reaching its highest level since April 2014.
The slide appears to have been party attributed to falling tax receipts as they fell to 3.9% year-on-year last month, while VAT revenues grew by just 0.2%.
The figures are a poor start to the new financial year for Chancellor Philip Hammond, with the Office for Budget Responsibility (OBR) forecasting that government borrowing could rise as high as £58.3bn in 2017/18.
John Hawksworth, PwC chief economist said;
‘Public borrowing in April 2017 was £10.4 billion, around £1.2 billion higher than the same month last year. We should not read too much into a preliminary estimate for a single month, but it is consistent with the broader picture painted by the OBR in March when they predicted that the budget deficit could widen again this financial year.’
Meanwhile the US Dollar has now relinquished all of its gains since Trump’s election, with the Dollar index, which compares USD to a basket of major currencies, now down 6.6% from its post-election high.
While many investors had hoped that Trump’s election would help to stimulate growth thanks to his plans for ambitious stimulus spending and tax reforms, his presidency has been marred by a number of political scandals in recent weeks, which has seen confidence in the ‘Greenback’ plummet.
Markets fear that this has set back the President’s plans to implement his economic reforms as his office appears to spend most of its time fighting the various political fires that have engulfed Trump’s administration.
Looking ahead the USD GBP exchange rate may stumble this afternoon as analysts predict that US New Home Sales will have fallen from 621,000 to 610,000 in April.
Meanwhile, the Pound may tumble once again on Thursday as a second reading of the UK’s first quarter GDP figures is expected to confirm that Britain’s economic growth slowed from 0.7% to 0.3% at the start of 2017.
Current Interbank Exchange Rates
At the time of writing the USD GBP exchange rate was trending around 0.7710 and the GBP USD exchange rate was trending around 1.2970.
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