GBP v USD falls to second lowest level since April 23

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waterman
Written by Dan Waterman
January 8th 2025
Pound v US Dollar down 3% in the last month..

The UK Government borrowed £2BN from the market yesterday at a rate of 5.2%, the highest since Gordon Brown was chancellor back in May 1998.

This is significant news as it risks Chancellor Reeves either; breaking her own 'non-negotiable' fiscal rules, possibly having to raise taxes or seeing public spending cuts.

Government will need growth to pick up materially in order for the economy to churn out the tax revenues the government needs to fund its borrowing. However, the economy has flat-lined and the rise in borrowing has now wiped out the chancellors headroom.

This makes the UK Spring budget a risk event and headwind. 

The situation is a bit of a double-edged sword as far as the Pound is concerned because low growth = nervousness in investing and holding UK assets (bad for consumers & £). But, it would mean higher interest rates for longer (bad for consumers, good for £).

Sterling is 0.5% lower across the board because of the news.

Over in the US, things continue to improve with job openings increasing to a 6-month high and PMI comfortably beating estimates recently.

With inflation ticking up, the market now doesn't expect to see a US interest rate cut until the middle of the year. With Trump being $ positive too, this compounding will be sure to see the King Dollar continue its dominance in the weeks and months ahead.

.



Expected mid-market ranges for January 8th 2025


gbp

GBP
usd

USD


    $1.2350 - $1.2450    





gbp

GBP
eur

EUR


    €1.2000 - €1.2050    



On this day -

In 1708, Spanish Armada headed by San Jose and loaded with gold, sinks after a British squadron attacks off the coast of Colombia


In 1835, US national debt is $0 for the first and only time in history


Famous birthdays today include; Elvis Presley, Stephen Hawking, David Bowie & Kim Jong-un



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