EU focus: Pound erases gains after British government's borrowing exceeds forecasts

The pound erased its gains against the dollar after the nation’s November budget deficit swelled to a record, exceeding economists’ forecasts.
Net borrowing was 22.8 billion pounds ($35.4 billion), compared with 16.7 billion pounds a year earlier, the Office for National Statistics said today. The median of forecasts was 16.8 billion pounds. Spending rose the most since February. The shortfall excluding government support for banks was 23.3 billion pounds.
The Swiss currency gained as Moody’s placed Portugal’s A1 long-term rating and Prime-1 short-term rating on review, reinforcing concerns that some European nations will struggle to raise funds amid a slew of credit-rating and outlook changes.
“European currencies which are backed up by strong economic fundamentals, like the Swiss franc, have strengthened,” said Henrik Gullberg, a currency strategist at Deutsche Bank AG.
Swiss exports declined in November as a stronger franc made goods less competitive abroad and the economic recovery lost some momentum.
Exports, adjusted for seasonal swings and inflation, dropped 3.4% from October, when they rose a revised 2.3%. Imports fell 3.3% from October, when they increased a revised 1.7%. The trade surplus was 1.93 billion Swiss francs, down from 2.05 billion francs.
The Reserve Bank of Australia left interest rates unchanged two weeks ago because policy was judged to be “mildly restrictive” given signs of consumer caution and few inflation pressures, minutes of its Dec. 7 meeting showed.
Household “restraint, if it continued, would provide some scope for investment to rise without causing aggregate demand to grow too quickly and inflationary pressures to build,” according to the minutes. After the November rate rise and an increase in the nation’s currency, “monetary policy was judged to be mildly restrictive.”
RBA Governor Glenn Stevens left the overnight cash rate target at 4.75% after seven increases since October 2009. Higher borrowing costs helped slow third-quarter growth and savings have risen, even as energy and mining investments keep unemployment at about half the near-10 percent U.S. jobless rate.