GBP exchange rates remain flat despite concerning economic data released this morning

Government debt within the UK has reached its highest December figure on record according to figures released this morning. The currency markets have barely been impacted though, as these figures were expected, but it is a concern for the UK economy moving forward and could weigh on the Pounds value.

The government’s decision to support households and businesses with rising energy bills, along with increasing interest rates increasing the debt burden on national debt has pushed UK government borrowing to a record December high of £27.4bn.

Moving forward, this limits the potential for UK Chancellor of the Exchequer, Jermey Hunt to offer many giveaways and make budget cuts when he delivers his next budget on the 15th of March.

This could limit any upside for the Pound moving forward, unless economic updates offer a more bullish outlook for the UK economy moving forward.

UK property prices are another area of focus as previously touched on within our daily blogs. If there is a steep decline in property prices the usual knock-on effect would be a drop in spending owing to the decreasing wealth of the nation. There have been forecasts of a drop in property prices so this could be another important topic through 2023.

With regards to monetary policy, the Bank of England is currently in a period of silence ahead of next week’s interest rate decision. The expectation is for is for the BoE to hike rates for the 10th time in a row by another 0.5% which would bring rates up to 4% from the current 3.5%. The decision takes place on the 2nd of February and moving forward the expectation is for a peak of 4.5%.

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