The following days could send the euro-sterling cross above the first significant resistance as the short-term momentum appears bullish.
UK government borrows record amounts
The UK government’s borrowing increased again in March, to the tune of £21.5bn, according to figures released by the Office for National Statistics (ONS).
It was just over the projected £21.3bn and was the second most extensive monthly borrowing since records began in 1993. The energy incentive program has been blamed for the growth. An estimated £139.2 billion was borrowed in the fiscal year ending March 31, up £18.1 billion from the previous year, making it the fourth largest on record, equal to 5.5% of GDP.
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Chancellor Jeremy Hunt stated that these figures were an unavoidable result of borrowing “eye-watering sums” to aid people and companies during a pandemic and Putin’s energy crisis.
Because of those efforts, unemployment is at a near-record low, and the typical family has received almost £3,000 in cost-of-living assistance this year and last.
Manufacturing sector remains weak
Output in the UK manufacturing sector has fallen over the past three months, based on the latest CBI industrial trends survey, with volumes falling by an especially harsh -15 percentage points, the lowest reading since July 2020.
Motor vehicles and transportation equipment were the most hit, although 13 of the 17 industries still saw decreases. The entire order book balance was -20, even though the completed product inventory increased to +19. The total number of new orders was unchanged at -3, but the balance climbed at the slowest rate since April 2021, from +50 to +64 from January.
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Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, says, “April’s survey provides some early signs that the downturn in the manufacturing sector is starting to bottom out.”
In other news, Ben Broadbent, the BoE’s Deputy Governor, said that had they seen inflation shocks coming, BoE would have tightened policy sooner.
“If we had started raising rates six months earlier, it might have lowered peak inflation by a maximum of half a percentage point,” he added.
Another rate hike in Europe
In Europe, May’s GfK consumer mood index for Germany rose to -25.7 from -29.3 (after being revised upwards), marking the seventh consecutive monthly gain.
Later in the session, other ECB policymakers, including Andrea Enria, Kerstin af Jochnick, and Luis De Guindos, are slated to speak. Their words may shed light on the future course of the central bank’s monetary policy.
The European Central Bank (ECB) is largely predicted to increase interest rates again in early May, with the big unknown being whether the increase would be a quarter-point or a half-point.
As previously mentioned, the resistance is near previous highs at around 0.8860, and if the euro jumps above that level, the next target could be in the 0.8950 area. Alternatively, the support is seen near 0.88.
EUR/GBP daily chart, source: author´s analysis, tradingview.com
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