The pound also strengthened following today’s release of December’s public sector net borrowing report, which revealed that the government had borrowed less-than-expected ahead of the spending boost predicted for the Chancellor’s March Budget.
Andrew Wishart, a UK Economist at Capital Ecomonics, said: “We suspect [Javid] will increase investment by about £10bn a year – 0.5 [percent] of GDP.”
“That would provide a substantial and much-needed boost to economic activity.”
The euro, meanwhile, was undermined as January’s French business sentiment gauge undershot consensus, leaving markets concerned for the economic health of the Eurozone’s second largest economy.
This was also followed by critical comments from US President Donald Trump, who said that doing business with the European Union was “more difficult” than with China, leaving some single currency investors speculating on whether a US-EU trade deal will emerge this year.
EUR traders are also becoming increasingly jittery over US-China trade relations, which are under strain following the “phase one” trade agreement.
Looking ahead to tomorrow, we could see the pound to euro exchange rate hold on to its gains if the European Central Bank is dovish in its statement following its first interest rate decision of 2020.