Sterling rallied 0.73% to $1.5615 this afternoon amid optimism that eurozone leaders are close to a solution to the region’s debt crisis.
Sterling was also boosted by George Osborne’s speech this afternoon. The chancellor of the exchequer today said the Office for Budget Responsibility (OBR) doesn’t see the UK entering a recession, although he said that growth is expected to drop sharply to 0.9% this year, down from earlier expectations of 1.7% in March. For next year, the OBR predicts growth of 0.7%, down from earlier forecasts of 2.5%. Mr Osborne said it would be difficult to avoid a recession should Europe enter into one, however.
He also announced that public sector pay rises are to be capped at 1% for two years and said debt was falling, although ‘not as quickly as we wished’. In 2011-12, debt is forecast to be £127 billion, up from earlier expectations of £122 billion.