Confidence dwindles in the pound as tariff fears subside

Daily Currency Update

Pound sterling once again finds itself under pressure as we move into mid-week trading as fears over the future of the countries finances make for rockier footing.

The Office for Budget responsibility has warned in its latest fiscal risk and sustainability report that the pressure is mounting on the fiscal outlook for the UK following a week to forget for the PM and Chancellor.

With recent efforts to shore up the UK’s public finances having limited and temporary success in recent years, markets are increasingly sensitive to the notion that the government is losing its grip on finances.

The UK currently has the sixth highest debt level, fifth highest deficit and third highest borrowing costs among 36 advanced economies with the economy currently on course to have a debt to GDP ration of 270% by 2070.

As a result, GBP has returned gains made earlier in the week, it seems as though UK bond market volatility could be a regular feature in the currencies strength for months to come. Given this, interest rates could again play a fundamental role in the 2^nd half of the year as a continuation of the current situation could force the Bank of England to accelerate its rate cutting cycle as investors continue to lose confidence in the pound.