U.K. Public Finances Fails to Impress, British Pound Remains Under Pressure

U.K. June public finances came in somewhat better than expected, with net borrowing at GBP13.0 bln, versus our survey median for 14 bln. But this was still the highest June net borrowing figure on record. Meanwhile, net cash requirement came in at GBP19.0 bln (median 20 bln), also the highest June reading on record. Overall, data naturally highlights the poor state of U.K. public finances – which is only expected to deteriorate further – although the June figures were not quite as bad as expected. Gilt futures hardly moved on the release.

EUR-GBP was lifted by a U.K. clearer in large size, which saw the cross trade up to 0.8653 session highs. Model fund interest entered the market on the way up and another U.K. name is reportedly sitting on the bid around 0.8645 now. The strong interest via EUR-GBP encouraged U.K. names to force Cable down to 1.6427 lows, but good standing bids ahead of 1.6420 provided a modicum of support. Meanwhile, the U.K. public finances may add to the GBP support.