British sterling slips as UK public borrowing hits November record

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Sterling slipped against the dollar and euro on Wednesday as British public borrowing hit a November record, underscoring the challenges for the UK economy.

The pound was last down 0.3 percent at $1.21515 and lost 0.4 percent versus the euro to 0.87 pence.

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British borrowing rose to its highest for any November since records began, reflecting higher costs for energy subsidies, data showed on Wednesday.

Lower borrowing as Britain’s economy “recovered from COVID-19 lockdowns and activity - and tax receipts - rose, appears to have come to a halt now and gone into reverse,” said Stuart Cole, head macro economist at Equiti Capital.

“The outlook is not looking great and understandable that sterling has lost some ground.”

Yet sterling is still heading for its best quarter against the dollar since 2009, with a 9 percent jump since September. The dollar index, which measures the greenback against six major currencies, is heading for its biggest quarterly loss in nearly 12 years.

Traders have bet the US Federal Reserve will soon stop raising interest rates as US inflation slows quickly, sending the dollar tumbling against major currencies.

“It’s dollar weakness,” said Michael Hewson, chief market analyst at CMC Markets. “We’ve seen a fairly decent rebound in the last three months.”

The dollar index turned negative on Wednesday after adding 0.2 percent, adding to losses of 0.6 percent on Tuesday after the Bank of Japan adjusted its control of bond yields - a slight move away from its ultra-easy monetary policy. The Japanese yen fell slightly from the four-month high versus the dollar it touched on Tuesday.

Analysts said the pound was likely to face headwinds in 2023, citing the costs of energy subsidies and soaring public borrowing.

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