Sterling Dragged Down by Swelling Deficit
The British pound fell to $1.35—a two-week low—after government borrowing data fell short of expectations. Public sector net borrowing hit £18 billion in August, the highest for the same month in five years and well above expectations of £12.7 billion.
Pressure is mounting because since the start of the fiscal year, borrowing has reached £83.8 billion—£11.4 billion above the OBR's March projection—with upward revisions of £5.9 billion for previous months. These figures add to the pressure ahead of the autumn budget, amid global debt concerns that recently pushed 30-year gilt yields to a record high.
On the policy front, the Bank of England (BoE) held interest rates at 4% (voting 7–2) and slowed QT to £70 billion, while maintaining a cautious tone. Markets are slightly increasing bets on longer-term easing, but are awaiting fiscal clarity before taking a more aggressive stance.
In the US, the Fed cut rates by 25 basis points and signaled an additional 50 basis points this year, although Powell emphasized this was not the start of a major easing cycle. This context strengthened the US dollar, adding pressure on sterling.
Key points:
GBP fell to $1.35 due to the surge in the August deficit (£18 billion).
Fiscal 5-month borrowing: £83.8 billion, above OBR projections; upward revision to £5.9 billion.
BoE maintains 4%, QT slowed to £70 billion, stance remains cautious.
Fed -25 bps + signals -50 bps strong dollar, GBP under pressure. (ayu)
Source: Newsmaker.id
