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GBP looking strong vs EUR and USD

GBP looking strong vs EUR and USD

Short and sweet, we find ourselves in much the same position as yesterday; The Netherlands’ AAA rating now apparently under threat after the government collapsed due to an inability to agree to austerity measures. GBP/EUR is trading around 1.2255 having tested 1.2270 overnight.

Excluding financial sector interventions, we expect public sector net borrowing to rise by £15 billion in March, which is a little below the consensus forecast of £16 billion. That would see government borrowing reach around £124 billion for the 2011-12 fiscal year against a forecast of £126 billion. Departmental discretionary spending was extremely strong in January and February and should have supported economic activity. There is therefore a good chance of some slowdown in spending in March, which is why we look for a small undershoot. Strong retail sales volume data suggest that VAT receipts will be relatively solid helping to reduce the deficit further.

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