Pound heads for worst week since mid-May as public debt surges | Money

Banknotes of Euro, Hong Kong dollar, US dollar, Japanese yen, British pound and Chinese 100 yuan are seen in this picture illustration in Beijing January 21, 2016. — Reuters pic

LONDON, June 19 — Sterling was on track for its worst week since mid-May after fresh data today showed government borrowing had hit record highs, more evidence that the coronavirus-stricken economy was a long way from recovering.

The UK’s public debt exceeded economic output for the first time since 1963, when Britain was still paying off debt from World War Two.

“UK public sector finances for May show how heavy the cost of the pandemic has been in the first two months of the fiscal year,” said Kit Juckes, chief global FX strategist at Societe Generale.

The pound was down 0.2 per cent against the dollar at US$1.2407 (RM5.31) by 1248 GMT, after touching US$1.2361 earlier, its lowest since June 1. Against the euro, the pound was last down 0.5 per cent at 90.66 pence, a three-month low.

The euro recouped some early losses against the dollar as European Union leaders discussed regional divisions over a €750 billion (RM3.5 trillion) coronavirus recovery fund.

“We still think EUR/GBP is likely to spend most of the next few months above 0.90,” Societe Generale said in a note.

The pound rose briefly today on data showed retail sales rebounded in May more than expected after April’s slump.

Sterling had slumped more than 1 per cent against both the euro and the dollar on Thursday after the Bankk of England increased its bond-buying programme by £100 billion (RM530.3 billion) to bolster the coronavirus-hit economy.

Brexit-related risks also continued to weigh on sterling. British Prime Minister Boris Johnson told visiting French President Emmanuel Macron yesterday that talks on a post-Brexit deal cannot drag on into the autumn.

German Chancellor Angela Merkel also said the EU and Britain need to reach a deal by the autumn. Britain left the EU on January 31, but talks on future relations have so far made little progress.

On a brighter note, Britain’s chief medical officers said the Covid-19 threat level should be lowered one notch. — Reuters

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