Pound Sterling Tests New Lows Amid UK Fiscal Woes and Greenback Strength
The British Pound (GBP) continued its decline against the US Dollar (USD) on Wednesday, reaching a 12-week low. The GBP/USD pair traded at around 1.3272, its lowest price since July 2. This downturn comes as the Greenback maintains its strength across the board due to Federal Reserve tightening hopes and optimism about a fresh attempt to reach a peace deal with Iran.
The UK's business activity figures were mixed, with preliminary S&P Global Purchasing Managers Index (PMI) numbers showing an improvement in manufacturing activity to 52.0 from 51.7 in August, contrary to expectations of a slowdown to 51.6. However, this positive news failed to lift the Pound.
The GBP's weakness is also attributed to the UK's fiscal deficit exceeding market expectations. The Office for National Statistics reported that public sector borrowing hit £18.27 billion in August, surpassing forecasts and last year's figure of £15.35 billion. This has put additional pressure on UK Chancellor John Healey ahead of his first budget.
The cumulative deficit from April to August reaches £77.3 billion, exceeding the Office for Budget Responsibility's projection by £8.1 billion. This development is likely to weigh on the Pound in the coming days.