Sterling holds on to gains, investors mull rise in borrowing
Sterling , which rose 0.6% on Monday, its biggest one-day gain in a month, was last at $1.3493, showing little change on the day. It was also steady against the euro , which was at 86.7 pence.
Britain borrowed more than expected in June as high inflation added to the government's debt costs, according to official data that is likely to add to speculation about the need for fresh tax increases later this year.
Public sector net borrowing totalled 20.7 billion pounds ($27.9 billion) last month, the data showed. This compares with a forecast of 17.1 billion pounds for June from the Office for Budget Responsibility, the budget watchdog.
"These overshot expectations yet again, a fact that should refocus minds on UK fiscal sustainability risks, especially after warnings by the ONS that the 20.7 billion pound figure recorded represents 'the second-highest June borrowing since monthly records began in 1993, after that of June 2020'," analysts at Monex said.
"As we have noted previously, this is not a sterling positive dynamic, leaving risks to the pound tilted to the downside ahead of Thursday's PMI release," they said.
The borrowing figures added to a sense among investors that finance minister Rachel Reeves may have to raise taxes again later this year to remain on track to meet her targets for fixing the public finances.
A separate report on Tuesday showed grocery inflation in Britain rose to 5.2% in the four weeks to July 13, up from 4.7% in last month's report and the highest since January last year, heaping more pressure on UK households.
Market researcher Worldpanel by Numerator, which published the report, said just under two-thirds of households say they are "very concerned" about the cost of their groceries, and are switching to supermarket own-label products.
The numbers align with data last week that showed nationwide consumer price inflation picked up more than expected in June, also hitting the fastest pace since January 2024.
The Bank of England is expected to cut rates by a quarter point next week and at least one more time before the end of the year.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
21 minutes ago
- Reuters
German government to approve 2026 budget with record investment and borrowing surge, sources say
BERLIN, July 28 (Reuters) - The German government will on Wednesday back a 2026 draft budget which includes record investment of 126.7 billion euros and borrowing of 174.3 billion euros as part of its fiscal bazooka for infrastructure and defence, finance ministry sources said. Germany is throwing off decades of fiscal conservatism in the hope of reviving economic growth, modernising its crumbling infrastructure and scaling up military spending, as Europe's biggest economy has gone from economic powerhouse to the euro zone's laggard. It is the only G7 economy that failed to grow for the last two years and the government forecast in the spring that it would stagnate again this year. The sources said that with the budget plans, the economic environment should improve noticeably over 2025 and 2026 compared with those forecasts. The 2026 draft budget comes together with a medium-term financial framework until 2029, with the whole package expected to be approved by the cabinet. The budget discussions will then start in parliament at the end of September before expected approval in both houses of parliament at the end of the year. The 2026 draft budget, with total spending of 520.5 billion euros ($606.80 billion), includes 126.7 billion euros ($147.71 billion) in investments earmarked for the modernisation of the country. That is an increase from 74.5 billion euros in 2024 and 115.7 billion euros in 2025. The investment surge in 2026 and subsequent three years will be possible thanks to a special 500 billion euro ($583 billion) infrastructure fund and an exemption from debt rules for defence spending approved in March. The special fund for infrastructure, which is also excluded from Germany's "debt brake" that limits borrowing to 0.35% of GDP, will add borrowing of 58.9 billion euros in 2026. For defence, the 100-billion-euro special fund created by former Chancellor Olaf Scholz following Russia's invasion of Ukraine, which will be exhausted in 2027, will add 25.5 billion euros in borrowing in 2026. In the core budget, borrowing will go up from 33.3 billion euros in 2024 to 89.9 billion euros in 2026, the sources said. Adding those three components, total borrowing in 2026 will be 174.3 billion euros ($203.20 billion). It compares with total borrowing of 50.5 billion euros in 2024, under the previous government. Interest expenses will rise more sharply than previously forecast, the sources said, forecasting an increase to 66.5 billion euros in 2029, which compares with the 61.9 billion previously expected. Germany will raise defence spending to 3.5% of economic output by 2029, sources said on Monday. After low spending following the end of the Cold War, Germany complied with the NATO defence alliance's target of 2% of GDP for the first time in three decades in 2024 due to Scholz's special fund. NATO countries committed in June to spend 2.8% of GDP on defence in 2026 and then increase it to 5% - a new target to be achieved over the next 10 years, representing a jump worth hundreds of billions of dollars a year from the current goal. Germany's total defence spending will go up from 95.1 billion euros ($110.90 billion) in the draft budget for 2025 to 161.8 billion euros ($188.67 billion) in 2029, the sources said. Germany would be able to borrow a total 380 billion euros for defence between 2025 and 2029 thanks to debt brake reform from March, they said. ($1 = 0.8519 euros)
ITV News
23 minutes ago
- ITV News
Starmer meets Trump in south Ayrshire for talks at Scottish golf resort
The Prime Minister Sir Keir Starmer and his wife Lady Victoria Starmer have met Donald Trump at the US president's golf course in south Ayrshire, Scotland, for a series of wide ranging talks on trade and global affairs. Speaking on the steps of the president's residence at his Turnberry resort, and accompanied by the sound of bagpipes, Trump hailed the deal on tarrifs he and Starmer had struck, describing US-UK relations as "unparalleled", claiming: "We want to make the prime minister happy". Trump took a series of questions from journalists upon his arrival, who were keen to question the pair on what they would be discussing during the visit. Occupying most of the president's attention was the ongoing crisis in Gaza. "I think it's one of the main reasons for our meeting," he told reporters. Starmer has come under pressure in recent days to move further and faster on recognising Palestine as a soverign state. 255 MPs from nine seperate parties have all written to the PM demanding he move to recoginse Palestine. The UK's G7 ally France also announced last week it would be recognising Palestine's statehood. Asked whether he felt recognising Palestine as a state was a necessary step towards resolving the crisis, Trump refused to take a stance, adding: "I don't mind him taking one," as he signalled Starmer. Contradicting Israeli Prime Minister Benjamin Netanyahu's assertions there was no starvation in Gaza, Trump said: "I'm looking at getting people fed right now. "Maybe that's the number one position because you have a lot of starving people." The US President claimed America had given $60 million (£45 million) in aid to Gaza already but that other countries would need to step up. Jumping in, Starmer emphasised: "It's a humanitarian crisis, right? It's an absolute catastrophe. Nobody wants to see that. He added: "I think people in Britain are revolted at seeing what they're seeing on their screens. So we've got to get to that ceasefire." Among the President's remarks was a strongly worded condemnation of Russian Presdient Vladimir Putin and the suggestion he would bring forward the deadline given to Putin to negotiate a ceasefire. "I'm very disappointed in President Putin. Very disappointed in him," said Trump. "We're going to have to look and I'm going to reduce that 50 days that I gave him to a lesser number because I think I already know the answer - what's going to happen." The US President was referring to his previous announcement in the Oval Office that he had given Putin 50 days to negotiate a ceasefire deal with Ukraine before imposing 100% secondary tariffs. Secondary tariffs would target Russia's trading partners in an effort to isolate Moscow in the global economy, potentially including nations that rely on Russia for oil and natural gas. Donald Trump will also meet with Scotland's First Minister John Swinney druring his trip, at which Swinney will broach the subject of tarrifs on Scotch whisky. Speaking on Monday morning, Swinney claimed the tariffs on this industry are currently costing whisky manufacturers £4 million a week and he would use this meting to make the case for lowering them. Asked about this on the steps of Turnberry the president, who himself does not drink, said, "I'm not a big whisky drinker... We're going to take a look at it." The president will be back in the UK in just under two months when he will be hosted by King Charles during a second official state visit.
The Independent
23 minutes ago
- The Independent
Man United transfer news: Benjamin Sesko, Ollie Watkins, Corentin Tolisso and more
Manchester United face a crucial summer as Ruben Amorim finally gets the chance to shape his squad and transform his failing team into contenders at the top end of the table. It shouldn't be forgotten that Amorim initially rebuffed United's approach following the sacking of Erik ten Hag, and perhaps he was wise to try and delay the move, because what followed was a disastrous campaign cuminating in the 1-0 loss to Tottenham in the Europa League final. Now Amorim has a full preseason to prepare his side and a summer transfer window to mould his squad before a season without European football, and he must take full advantage. The release of the Premier League fixtures shows a difficult start for United, with an opening game agasint Arsenal and fixtures against Manchester City and Chelsea within their first five matches of 2025/26, and the manager's future could be called into question early should his side struggle. United got some early business done with the signing of Matheus Cunha from Wolves in a £62.5m deal before completing a move for Brentford star Bryon Mbeumo, but co-owner Sir Jim Ratcliffe has made clear that the money pot is not deep. Offloading high-wage players such as Jadon Sancho and Alejandro Garnacho seems key to funding the revolution, with a lack of movement causing frustration among fans as United lag behind their rivals. Here's everything you need to know about Manchester United's summer transfer plans. Areas to improve Perhaps it is easier to try and identify some parts of the team that don't need improvement. Three players could genuinely claim to have had decent seasons – Bruno Fernandes, Noussair Mazraoui and Amad Diallo – while Harry Maguire, Casemiro and Diogo Dalot all did OK in spells, but that is about the extent of United's reliable performers last season. Now that Matheus Cunha and Bryan Mbeumo's arrival are secured, the top priorities are: sign a proven goalscoring striker, given the toils of Rasmus Hojlund and Joshua Zirkzee up front; buy a goalkeeper to compete with (or outright replace) the error-prone Andre Onana; recruit a wing-back who can excel in Amorim's system. Done deals Ins: Bryan Mbeumo (Brentford, £70m), Matheus Cunha (Wolves, £62.5m agreed), Diego Leon (Cerro Porteno, undisclosed fee), Enzo Kana-Biyik (Le Havre, free transfer) Retained: Tom Heaton (signed new one-year deal after expiry of old contract) Outs: Marcus Rashford (Barcelona, loan), Enzo Kana-Biyik (Lausanne-Sport, loan), Daniel Gore (Rotherham, loan), Christian Eriksen (out of contract), Victor Lindelof (out of contract), Jonny Evans (out of contract) Potential targets Benjamin Sesko, RB Leipzig Man United have reportedly begun talks with RB Leipzig over a move for much-wanted frontman Benjamin Sesko. While Arsenal have cooled their interest in the Slovenian following the arrival of Viktor Gyokeres, Newcastle are also said to be keen on Sesko. With United in desperate need of a proven goalscorer, they could deem Sesko as the man to solve their woes. Corentin Tolisso, Lyon One of the latest rumours involving United sees them linked with Lyon midfielder Corentin Tolisso. The 31-year-old is coming off a decent season for the French side, and could be available for a cut-price fee due to the French side's financial troubles. Concrete links are yet to materialise, but he is thought to be available for £15m. Richard Rios, Palmeiras Another one with few concrete links, but reports in Brazil claim that United are interested in Palmeiras midfielder Richard Rios. United sent scouts to watch the Colombia international during the Club World Cup, with the Brazilian side hoping to start negotiations around the £30m mark, though Rios has already said yes to a proposal from AS Roma and could be heading to Serie A. Ollie Watkins, Aston Villa United's search for a striker continues and while Cunha and Mbeumo will be solid attacking options, there remains a desire to add a recognised number nine to the squad if possible. Watkins was the subject of interest from Arsenal in January but with the Gunners signing United target Gyokeres, the England international could be a valid, Premier League-proven attacking option. Villa would want at least £60m for Watkins, though links with Old Trafford have gone quiet after United wrapped up a move for Mbeumo.
