The pound declined against its major rivals in European deals on Tuesday, after U.K. Chancellor of the Exchequer George Osborne called for spending cuts of up to 40 percent by 2020, with an aim to return to surplus.
In the spending review 2015, the Chancellor would set out how the government will both invest in priority public services and deliver the GBP 20 billion further savings required to eliminate Britain’s deficit by 2019/2020. The review will be published on November 25.
The government departments would be required to draw up plans ” to model two scenarios of 25% and 40% of savings within their resource budgets by 2019-20 in real terms,” the treasury department said in a statement.
The pound has been under pressure after data showed that U.K. public sector net borrowing narrowed less-than-expected in June.
Data from the Office for National Statistics showed that PSNB, excluding public sector banks, dropped GBP 0.8 billion to GBP 9.4 billion in June. Economists had been expecting a reading of GBP 8.5 billion.
The European markets gave back initial gains as caution crept in following recent sharp gains on optimism over Greece.
Greece’s stock and bond markets are likely to remain closed through Wednesday, when the parliament would vote again towards the final negotiations for the third bailout deal. Lawmakers are due to vote on the laws pertaining to civil justice reforms, as well as approve an EU measure known as the Bank Recovery and Resolution Directive for the future recapitalisation of Greek banks.
The pound was trading a positive territory in Asian deals, on the back of strength in Asian shares.
The pound depreciated to a weekly low of 1.5528 against the greenback, down by 0.19 percent from yesterday’s closing quote of 1.5557. The next possible support for the pound-greenback pair lies around the 1.54 mark.
Moving away from an early high of 1.5017 against the franc, the pound slipped to a 5-day low of 1.4919. Continuation of the pound’s downtrend may see it finding support around the 1.485 region. The pair was valued at 1.4998 at Monday’s close.
The figures from the Swiss Federal Customs Administration showed that Switzerland’s foreign trade surplus increased in the six months ended June, as imports fell faster than exports.
The trade surplus rose to CHF 17.7 billion during the first half of this year from CHF 15.989 billion in the previous six-month period.
The pound reversed from an early high of 0.6946 against the euro, edging down to a 5-day low of 0.6994. If the pound continues its early decline, it is likely to test support around the 0.71 mark. The pair ended Monday’s trading at 0.6949.
The pound weakened to a session’s low of 193.04 against the Japanese yen, and held steady thereafter. This is a 0.52 percent decrease from an early high of 193.85. The pound is seen finding support around the 191.00 area. At yesterday’s close, the pair was quoted at 193.14.
Looking ahead, Bank of England Governor Mark Carney is expected to speak at the Policy Exchange Summer Reception in London at 2:00 pm ET.
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