FILE PHOTO: British five-pound banknotes are seen in this image, the illustration jobs, November 14, 2017. REUTERS/Benoit Tessier/Artwork
LONDON (Reuters) – Sterling recovered slightly on Wednesday, but it remained vulnerable to a fall, as traders weighed the benefits of the support of the government to protect the economy of COVID-19 pandemic in the high cost, it will have to pay to do so.
Britain on Tuesday extended its job-retention system, in which the government pays 80 per cent of furloughed workers ‘ wages, and by another four months, until the end of the month of October.
But analysts estimate that it will cost the government billions to finance this device, which will then likely result in an increase of debt and taxes.
The Ministers will have to raise taxes sharply in the coming months to cope with an estimated £337bn deficit of the current fiscal year, in the wake of the corona virus of the pandemic, according to a leaked Treasury document, ” the Financial Times reported Wednesday.
“While the additional support for employment is welcome, the cost could quickly begin to weigh on investor sentiment, especially if the second COVID planning to emerge in the future,” said Derek Halpenny, research director at MUFG.
The scheme cost is estimated at 49 billion pounds by June, and Halpenny think it will be an additional cost of 30 billion pounds, to run it through October, ” he said.
The pound was last trading up 0.2 percent to $1.2275 and 88.29 pence against the euro.
However, the British currency has lost 2.5% of its value against the U. s. dollar this month, the most significant under-performed among the major currencies.
However, the book was far from its March lows, when it sank to $1.14, its lowest since decades.