FX.co ★ Sterling Falls as UK Budget Deficit Balloons

The British pound declined to $1.35, marking its lowest point in the past two weeks, following unexpectedly poor UK borrowing figures. In August, public sector net borrowing surged to £18 billion, reaching its highest level for the month in five years and far exceeding predictions of £12.7 billion. Over the first five months of the fiscal year, borrowing totaled £83.8 billion, surpassing the Office for Budget Responsibility’s March forecast by £11.4 billion, with earlier months' figures revised upwards by an additional £5.9 billion. These statistics increase pressure in anticipation of the autumn budget, amid international concerns regarding sovereign debt that recently pushed 30-year gilt yields to unprecedented highs. Simultaneously, the Bank of England held interest rates steady at 4% with a 7–2 vote, reduced its quantitative tightening program to £70 billion, and maintained a cautious outlook. Investors somewhat increased their long-term easing expectations. Meanwhile, in the United States, the Federal Reserve reduced rates by 25 basis points and indicated a further 50 basis point cut within the year, although Chairman Powell emphasized this was not the beginning of a comprehensive easing cycle.