Although official figures confirmed the 2009/10 fiscal year as the worst since records began, sterling has held onto this morning’s gains.
Data released earlier, revealed that the government borrowed a further £23.5 billion in March, beating market forecasts of £24.1 billion. This translates to government net borrowing for the year at a record high of £163.4 billion. However, this falls below the amount that Alistair Darling predicted in his pre Budget report, giving Labour a lift after yesterday showed a rise in unemployment.
UK retail sales were also released this morning, posting an increase of 0.4% in March, below market consensus, which called for a rise of 0.7% on the month. Although this was disappointing, February’s figure was revised up by 0.4%, offsetting the negative sentiment.
Duncan Higgins, senior analyst at Caxton FX says, “The pound has managed to hold its ground this morning despite the weak borrowing figures. The market has taken the broader view that the government’s book is not in as quite a dire state as the pre Budget Report had us believe.”
The reaction to the poor retails sales has been relatively muted with the market focused on the UK’s first quarter economic growth due tomorrow morning.
“The data is expected to show that the economy grew by 0.4% in the three months through March. The risks look to be on the upside, with a string of strong figures from the UK buoying expectations. At present the market appears to have sidelined election worries, and should GDP fall in line with forecasts we could see sterling reach higher,” continues Higgins.
Currently the pound is consolidating above 1.15 against the euro and 1.54 against the dollar, though its upward climb has slowed.
