Sterling recovered losses on Friday, as it climbed above the 1.30 mark again against the dollar, following the release of UK public sector net borrowing in June.
The pound was 1.3014, GBP/USD was up 0.31% against the dollar at 10:30 GMT.
UK public sector net borrowing in June increased to £6.85 billion, up from £6.71 billion in May. The expectation had been for borrowing to fall to £4.8 billion.
Retail sales for June had increased by 0.6%, an increase from May’s decline of 1.1%. Thursday’s data release had failed to boost sterling as it had fallen below the 1.30 mark during Thursday trading hours.
The European Central Bank kept interest rates historically low on Thursday, however the market interpreted the ECB President Mario Draghi’s comments positively as he indicated that tightening of monetary policy would be discussed in the autumn.
The euro jumped to a two year high against the dollar and to highs not seen since November 2016 against the pound.
Sterling was also weakened following the first week of Brexit negotiations, as the EU and UK government looked to have made little progress, putting pressure on the deadline of March 2019.
On Friday, the pound recovered some losses. EUR/GBP was down 0.21% at 0.8947.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down just 0.14% to 93.95.
The dollar has been under pressure this week as subdued inflation and weak economic data makes the Federal Reserve’s plan to hike interest rates for a third time this year more unlikely.
The dollar has also been weakened by U.S. political issues. President Trump’s healthcare reforms failed to be pushed through Congress earlier this week and as a result, the administration’s ability to overhaul the tax code and implement fiscal stimulus have also been questioned.
Sterling was flat against safe haven currencies. GBP/JPY was unchanged at 145.19. GBP/CHF was up slightly at 1.2358, an increase of 0.15%.
The pound had a mixed bag against commodity currencies. GBP/NZD took a hit as it was down 0.30% at 1.7483. The Aussie was weaker on Friday , GBP/AUD was up 0.75% at 1.6422. The Canadian dollar was down against the pound. GBP/CAD was 1.6359, an increase of 0.17% for the pound.
Investors will be watching the progress of Brexit negotiations to see if concessions will be made by either of the chief negotiators: Michel Barnier of the EU and David Davis of the UK.
The release of Q2 GDP for the UK next week ill also be monitored as an indication of the health of the economy following the shock election result in June mixed with high inflation and lower real wage growth.