The pound was under selling pressure this week, weighed down by record borrowing figures in the UK Budget and the sharpest fall in quarterly economic growth since 1979.
The pound was under selling pressure this week, weighed down by record borrowing figures in the UK Budget and the sharpest fall in quarterly economic growth since 1979. The Chancellor announced the economic downturn could see public sector borrowing rise to £175bn in the current fiscal year and to £173bn in 2010/11, well above his estimates in the Pre-Budget Report in November.
Preliminary official estimate showed UK real GDP contracted by a larger than expected 1.9% in the first quarter of this year, following a 1.6% fall in the previous quarter. The pound ended the week as the worst performing G10 currency against the US$, although recovering from a low of 1.4398 on Budget day to close at 1.4715. Against the euro, which was buoyed by data suggesting the worst of the contraction in the euro zone economy may have passed, the pound eased 2.4% to 1.1091 this week. €/$ rose 1.8% to 1.3267, with the US$ under pressure from weaker than expected labour market
and housing data this week.
The best performing G10 currency this week was the Swedish krona, after the Riksbank cut interest rates by less than expected and also dampened speculation of imminent quantitative easing. In a surprise move, the central bank of Canada cut interest rates to 0.25% from
0.5%, weighing on the loonie, however it later pared its losses after the monetary policy report said quantitative easing was not yet required. In emerging markets, Eastern European currencies were among the biggest gainers this week, led by the Czech koruna.
However, the Polish zloty was under strong selling pressure on concerns that its ambition of early euro membership may be delayed.