Sterling made gains against most major currencies on Thursday morning following data showing the UK government’s smallest budget deficit since 2007.
At 09:20 GMT GBP/USD was up 0.09% at 1.3506.
Following a Fed-inspired dollar boost on Wednesday evening, the pound dropped almost an entire percentage point. Sterling showed its strength as it climbed once again above the 1.3500 mark.
The Office for National Statistics released August public sector borrowing figures showing that the UK budget deficit was £5.7 billion. Economists had forecast a larger deficit of £6.50 billion.
This was the smallest deficit since 2007, and came following a July budget surplus, the first ror fifteen years. The UK Chancellor, Philip Hammond will release the government budget in November.
VAT receipts were an August record high at £11.6 billion.
The US dollar surged on Wednesday evening following a hawkish Federal Reserve statement. Interest rates were kept on hold, however the Fed indicated that balance sheet reduction would begin in October and the possibility of a December rate hike, the third of the year, looked to be back on the table.
Following Wednesday’s gains, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was flat on Thursday at 92.22.
The pound dipped slightly against the euro. EUR/GBP was up 0.08% at 0.8819.
Against the riskier commodity currencies, sterling made considerable gains. GBP/AUD jumped 1.01% to 1.697, while GBP/NZD was up 0.52% at 1.8432.
GBP/CAD increased 0.19% to 1.6662.
Sterling also made gains against safe haven currencies. GBP/JPY was edged up 0.22% to 151.77 with GBP/CHF up 0.34% at 1.3131.
Investors will be keen to listen to a speech made by European Central Bank President Mario Draghi on Thursday afternoon.
The main event for the UK will be the speech made by UK Prime Minister Theresa May in Florence on Friday evening. Sources suggest that May will announce her commitment to pay a ‘divorce bill’ to the European Union in order to kickstart the negotiations. It is expected that the speech will attempt to appeal to the leaders of the 27 nation states in the European bloc, and bypass the appointed chief Brexit negotiator Michel Barnier.