Pound Weakens Intraday As UK Public Borrowing Rises

By David Schutz,

THE TAKEAWAY: UK public finances, public sector borrowing higher than expected -> Cable stunts gains intraday

Higher than expected public borrowing numbers from the UK failed to meaningfully affect the British Pound today, despite fundamental fears that the UK’s massive budget deficit may overshoot itself. Public sector net borrowing rose GBP 15.9bln in March as opposed to the expected 14.2bln. and the revised previous 9.9bln.

The public sector net borrowing figure represents t he amount of new debt held by the UK government . In the long run, the government must balance the public sector account in order to sustain the economy . If the UK spends more than what it earns, it must finance this budg et deficit with an increase in net b orrowing . Growth in b orrowing is considered currency- bearish , because budget deficits are generally detrimental to the economy.

March’s public finance figures suggest that the trend in the UK's fiscal position continues to worsen. Cable weakened intraday; however, the Pound’s overall trend remains bullish on the back of recent solid jobs data and a more hawkish outlook from the Bank of England.
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Original Article: http://www.dailyfx.com/forex/market_alert/2012/04/24/Pound_Weakens_Intrday_as_UK_Public_Borrowing_Rises.html