Public borrowing in the United Kingdom has jumped to £35.9 billion this August, as the government continues to fight the economic fallout in the country caused by the coronavirus pandemic.
A significant sum of the money, that is, about £ 4.7 billion, was allocated on financial support to self-employed citizens in the third quarter. However, this program is soon to change this November, which will seriously affect the rate of borrowing, leading to its decrease.
At the same time, economists published despondent forecasts for the total budget deficit of the UK in 2020-2021, saying that it could reach £ 360 billion, about 17.6% of the country's GDP.
As a result, the pound, although was kept from falling to new monthly lows, is now trading at the level of 1.2800. The further direction of the quote will depend on who turns out to be stronger at this level, however, an upward move has a lesser chance of occurring, given the current situation of the UK due to quarantine and problems with Brexit. Any rise in the pound will only be temporary, but nonetheless would still reach price levels 1.2870 and 1.2960. Meanwhile, a successful breakout from the support level of 1.2690 will lead to a larger collapse to the levels of 1.2640 and 1.2580.
EUR / USD
On Friday, the European currency made an unsuccessful rally after the release of quite good data on German exports. According to a report, good growth in industrial production in many European countries has led to an increase in exports, however, it was not enough to bring back demand for the euro in the market. Expectations for exports in the manufacturing sector also rose to 10.4 points in September, but it failed to become an impetus for euro growth.
Meanwhile, the US dollar continues to grow, even despite the report of less active growth in orders for durable goods in August. The US Department of Commerce said that new orders only rose 0.4%, well below the expected increase of 1.8%. New orders for capital goods are particularly noteworthy though, as it rose 1.8%, indicating a recovery in the manufacturing sector.
With regards to economic activity, a decrease was observed in the area of Kansas City Fed, but expectations regarding future activity remained at a fairly high level. According to the report, the composite index for the services sector was 7 points in September, much lower than its 20 points in August.
Other important statistics are not scheduled to be published at the beginning of this week, so it is quite possible that the market will remain in favor of dollar bulls today and tomorrow. However, the upward correction in the EUR / USD pair could also begin at any time, and to do this, buyers of risky assets need to push the quote above the local resistance level of 1.1690, as such will quickly trigger a number of bears' stop orders and strengthen the euro even more to the highs of 1.1740 and 1.1780. But, if the pressure on the pair continues, and there are no clear hints of the end of the bearish trend, the pair will decline even further to the lows of 1.1580 and 1.1540.
