The worries about U.K. public sector net borrowing has come back again after silence in February as it has recorded its highest level since recording beginning 63 years ago with a very wider than expected deficit of the Public sector net borrowing has reached 23.5b Stg in March. The governmental spending is still forced to be up and the taxes down for spurring the investment and moving the struggling economy out of the recession because of the credit crisis which could hardly get out of it in the fourth quarter of last year after being the only western European economy in recession in the Q3 at -.1% quarterly as I have mentioned after the release of the net borrowing data of the public sector of Jan that the debt is in building up stance in UK too while the European efforts are emerging for staving it off in Greece and inside the euro area with the current struggling growth rate comparing with US which can underpin the greenback this year with the market focusing on the governmental inability to meet the costs of these debts. The greenback has been supported in the beginning of this week with the market worries about the Goldman sacks fraud but it could give back these gains with outstanding quarterly earning reports from Citigroup, Goldman sacks and apple thanks to its Iphone sales which could contain the market sentiment encouraging the investors' risk appetite putting pressure on the greenback again but the market worries about the debt situation in Europe has supported it again today.
These weak data from UK can underpin the conservative lead before the elections on the 6th on next month by god's will which can give a excuse to the British pound from falling in a rapid way this time not as it has done in Feb when the situation was mixed when the cable slumped to 1.4782 after the release of January public sector net borrowing data which posted its first net borrowing deficit month since the beginning of 1993 reaching 4.3b Stg while the market was waiting for covering 2.8B Stg which can keep pushing its budget deficit ratio to GDP above 12% like Greece otherwise it looks in building up in UK which is facing a higher inflation outlook as the BOE has ensured again recently in its last meeting minutes release last week after their unanimously decision to keep the BOE buying bonds plan unchanged at 200b Stg unchanged again which can erode the impact of its QE policy putting pressure on the British pound to fall again versus the greenback to fall again below 1.5 which can be kept further as the UK is still struggling with Q4 GDP 2009 revising up to just .3% from .1% in the first reading after being the only western European economy in recession in the Q3 at -.1% quarterly.
The single currency which was already possessed by the European rescue plan for Greece and the activation of it, has been hit again too by the downgrading of the Greece bond rating from A2 to A3 by Moody's which put the Greek prime one short term issuance under the review of downgrading too weighing negatively on it across the broad this week again pushing it down versus the greenback breaking 1.325 in the Asian session and trading below it currently. The single currency has been supported after the release of the 30b euros European rescue plan for Greece but it failed to break 1.37 on a profit taking wave across the broad after this significant rising in the beginning of last week. The rescue plan could calm down the market which was worrying about the Greek ability to finance its debt costs to the IMF and the credit market without European funding support but the market is still in need to get that the worst of this debt crisis has become behind of us and not still ahead of us to push up the single currency again which is not materialized yet to the market amid the current very slower pace of growth in the euro area comparing with US after the credit crisis negative impact on the EU economies which pushed the governmental spending up for spurring investment and growth on the account of their budget deficits which are threating the market confidence and the recovery itself right now with market focusing on the consequences of the debt building in Europe.
Best wishes
FX Consultant Walid Salah El Din E-Mail: snipped-for-privacy@fx-recommends.com