GBP/USD Shrugs Off Dire UK Borrowing Data

GBP price, Brexit news and analysis:

  • UK public sector borrowing in the first half of the current financial year was more than six times the figure a year earlier due to the economic cost of the coronavirus pandemic.
  • Official data also showed that public-sector debt rose further above the £2 trillion level and reached its highest as a percentage of GDP since 1960.
  • UK inflation in September rose to 0.5% from 0.2%.
  • Nonetheless, GBP/USD held its ground as “risk-on” assets benefited from rising hopes that a US fiscal stimulus package can be agreed.
  • The FTSE 100 index, though, is falling back.

GBP/USD edging up despite poor UK economic data

GBP/USD largely ignored a very poor set of UK borrowing, debt and inflation data early Wednesday, suggesting some continuing underlying vigor as “risk-on” assets benefited from rising hopes of a US fiscal stimulus package, and economic strength in China.

There are also hopes that US-China relations could improve if Joe Biden wins the US Presidential election on November 3.

GBP/USD Price Chart, One-Hour Timeframe (October 16-21, 2020)

Chart by IG (You can click on it for a larger image)

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FTSE 100 falls back, Brexit talks still a focus

By contrast, the FTSE 100 index of the major London-listed stocks was weaker in early trading Wednesday and there was mixed news on possible trade deals. While the EU-UK negotiations on their relationship once the Brexit transition period ends on December 31 continue to show no signs of progress, the US and the UK have launched a new round of talks focused on goods and tariffs.



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily -6% 6% -3%
Weekly 21% -24% 3%

UK borrowing, debt and inflation all rise

Turning to the UK economy, the cost of the coronavirus pandemic was evident in a very poor set of borrowing, debt and inflation data released Wednesday before the UK markets opened. Government borrowing in the first half of the 2020/21 fiscal year was more than six times the level a year earlier due to the cost of supporting the UK economy during the coronavirus pandemic.

Public sector debt climbed further above £2 trillion to 103.5% of GDP, the highest debt/GDP ratio since 1960.

However, the potentially negative impact of the borrowing and debt data was offset by the news that UK inflation rose to 0.5% year/year in September, up from 0.2% in August.

UK borrowing, inflation data.

Source: DailyFX economic calendar

You can find a guide to reading an economic calendar here

We look at currencies regularly in the DailyFX Trading Global Markets Decoded podcasts that you can find here on Apple or wherever you go for your podcasts

— Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex

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