Outlook For GBP EUR Exchange Rate Is Mixed Despite UK Government Borrowing Data

Modified: Tuesday, 23 April 2013 16:28 BST - Written by David Woodsmith

STORY LINK Outlook For GBP EUR Exchange Rate Is Mixed Despite UK Government Borrowing Data

This morning’s session brought the release of official UK government figures which revealed that the British administration borrowed £120.6bn during the financial year which ended on 5th April, 2013. Cynics were quick to point out that the figure was lower than last year’s comparable number by a suspiciously slim £300m (a minute amount for an economy the size of Britain’s).

The coalition government still states that it is aiming to reduce its mammoth budget deficit to zero by the financial year 2017-18. The market remains dubious about the credulity of this claim, but in spite of that, the Pound has enjoyed a respectable session in the currency market, gaining a small amount against most of the sixteen most-actively traded currencies with the exception of the North American tenders. The Pound euro exchange rate (currency : GBP/EUR) currently stands at 1.1735, having registered gains of almost a fifth of a percentage point on the day. Meanwhile, the Sterling to US Dollar rate has slipped slightly on the session and currently trades at 1.5281.

Part of the reason that the Pound has generally registered gains on the day against the majority of the other majors was due to comments made by the CEO of one of the world’s leading investment banks. Lloyd Blankfein, the head of Goldman Sachs, has given his seal of approval to the UK government’s long-standing austerity policy, stating that any deviation from the government’s existing plan to cut spending and augment taxation revenues would see the markets turn against the Pound.

On a less positive tone, this afternoon’s announcement by the HSBC Banking Corporation, (headquartered in the UK), that it is set to cut 3,166 jobs from its British operation has come as a blow to the prospects of a British economic recovery. The development stokes investors’ concerns, which were already heightened because of the most recent UK labour market figures which revealed that the level of domestic unemployment rose during the three months leading up to the end of February.

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