The pound (GBPUSD=X, GBPEUR=X) was steady against the dollar on Wednesday, up 0.1% to trade at $1.3546, with fear of tax rises in the autumn capping further gains.
The latest UK government borrowing figures has increased concerns over tax hikes in the autumn as well as unsettling the bond market which has hit the pound in global markets.
“That GBP risk premium is partly because of the euro’s idiosyncratic strength (due to its appeal as a reserve currency) but may also embed some UK budget concerns. Those were fuelled further this morning as the UK unveiled larger borrowing for June than expected by the UK fiscal watchdog,” analysts at ING wrote.
Capital Economics UK economist Alex Kerr, said: “The government’s U-turns on spending cuts and potential upward revisions to the OBR’s borrowing forecasts means the chancellor will probably need to raise £15-25bn at the autumn budget to maintain the £9.9bn of headroom against her fiscal mandate.”
The US dollar index (DX-Y.NYB), which measures the greenback against a basket of six currencies, was muted at 97.40.
Kevin Thozet, a member of the investment committee at Carmignac, said he expected the dollar to fall in the near future.
He blamed the “eroding credibility of US institutions, weakened by constant attacks against Powell and Fed independence, the surge in political uncertainty triggered by the trade war, and the reinforced risk of local inflation de-anchoring fuelled by higher tariffs and loose fiscal stance”.
Elsewhere in currencies, the pound pushed higher against the euro. Sterling was up 0.2% against the single currency to trade at €1.1538 at the time of writing.
