GBP has slightly decreased following the release of government borrowing data, which showed a net public sector borrowing of GBP10.7 billion in February. The budget deficit has reached GBP132.3 billion in the first 11 months of the fiscal year, GBP20 billion higher than expected.
This data has increased pressure on Chancellor Reeves to consider spending reductions or tax increases in the upcoming Spring Statement. Gilts are underperforming, and while GBP has followed the EUR’s performance, there has been a recent soft close indicating potential further declines.
Key Support And Resistance Levels
A drop below 1.2900/10 might signal more weakness for the pound. Currently, resistance stands at 1.2980.
The latest borrowing figures serve as a reminder of the mounting fiscal pressures facing the government. With the deficit surpassing forecasts by £20 billion, the Chancellor now faces tougher choices in the Spring Statement than initially anticipated. The debt trajectory suggests either spending cuts or tax hikes may be unavoidable, both of which could influence market sentiment in ways not yet fully priced in.
Sterling’s recent movement has reflected broader market trends, particularly tracking the euro. However, the soft close hints at hesitancy among traders, which could lead to further downside if selling pressure builds. A decisive break below 1.2900/10 would likely open the door to deeper losses, reinforcing the current bearish bias.
In the bond market, gilts continue to struggle. Underperformance there often feeds into currency moves, especially if yield spreads begin to favour other regions. With economic growth concerns also lingering, any additional hints of policy shifts from Threadneedle Street would be closely examined. Should resistance at 1.2980 hold firm, the current range may persist, but if momentum fades, downside targets may come into focus sooner rather than later.
Market Sentiment And Future Outlook
With all this in mind, careful attention to policy announcements and global risk appetite remains essential. Sentiment is shifting, and upcoming data points could dictate the next clear move.
