Sterling Tested as Dollar Finds Support

Sterling came in for some selling pressure yesterday as public finance figures released showed that public sector borrowing had reached record high levels in September. Yearlong borrowing has already reached a worrying £37.6bn thus far, to a nominal level not seen since records began. This figure would look even less attractive if it were to include the earmarked nationalisation money. This has provided concern over the viability of Chancellor Darlings proposed capital spending programmes that were tabled over the weekend. Mortgage lending figures released didn’t do Sterling any favours either, dropping to their lowest levels since Jan 2005

Dollar got a leg up on the back of some bullish news from America and was therefore the big mover of the day. It gained over 1.5% against Sterling and 0.8% against Euro. Ben Bernanke announced the possibility of another stimulus package, stating “consideration of a fiscal package by Congress at this juncture seems appropriate”. Credit markets are also showing signs of easing, with three month dollar LIBOR dropping 36 points to just over 4%,  a figure not seen since February.

Listen out for the sighs of relief from Icelanders today as the nation looks set to receive £3.5bn in the form of rescue package. Over £1bn is coming from the IMF, and the rest from Japanese and Nordic governments

Sweden decided it is better late than never to shore up their financial system, announcing a measure worth over 1.5 trillion Swedish Crowns. It will support its financial firms by offering Government backed guarantees on new bank borrowing, and setting aside another 15 billion crowns for further stabilisation

Looking ahead, the Bank of Canada meets today as there are rumours it may cut interest rates, CBI Industrial monthly trends are also due for release this morning and are expected to add to the torrent of bleak data seen recently.

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