Sterling took a step lower against the euro today and moved very slightly lower against the US dollar after UK data was released showing unexpectedly high public borrowing figures for November.
The Public Sector Net Borrowing Requirement result has called into question whether the government can meet its deficit-cutting target. The figure came in at almost £23billion in November, up from targets and last year’s figure of £17billion. The data, in conjunction with recent weak retail sales data, has shifted focus onto the state of the UK’s fragile recovery and its ability to grow in Q1 next year.
Despite this momentary blip, focus will undoubtedly return to the state of the EU and its debt crisis. Having had Ireland’s credit rating reduced to that of Trinidad & Tobago, Moody’s has now put Portugal on review for a possible (imminent) downgrade. Expect to see this saga continue throughout 2011.
In other news, the Swiss franc is continuing its bull charge as it smashes through all time highs against all of its major counterparts.
Tom Hampton
Analyst – Caxton FX
