British fiscal challenges are rising, with the latest data revealing a broader-than-anticipated budget deficit and deteriorating growth indicators. While the government's expenditure faces further cuts and the service sector has slipped, the pressure builds on the Bank of England to loosen the policy – which potentially weighs in Libra, commerzbank's FX analyst notes Michael Pfister.
UK budget deficiency expanded amid weak growth
“The numbers yesterday showed up why the UK was in a difficult situation at the moment. It started with net borrowing numbers for March, which was again higher than expected. For the entire fiscal year 2024-2025, ended in March, borrowing was almost 24bn higher than estimated October and £ 14bn higher than the March. high than originally thought. ”
“In a preliminary review, the OBR recognized two reasons for expanding the deficiency: first, the public sector pay continued to rise recently, pushing for spending. Second, the weak real economy has significantly reduced revenues. This is not a good sign because it points to a recession in the real economy.”
“At this point, you may wonder why it is related to pounds, because the built -in market currencies tend to not react very much to the fiscal news. However, the UK's recent growth is almost completely based on the public sector. So, it's not a good sign for Libra: less growth and more rates at the same time.”
