GBP/USD Drops 0.8% as UK Borrowing Surge Sparks Fiscal Concerns

GBP/USD has declined sharply by 0.8% to 1.2650, pressured by alarming UK fiscal data showing public sector borrowing exceeded forecasts. August borrowing reached £13.7 billion, significantly above the £11.2 billion expected, marking the third-highest August figure on record. The overshoot raises concerns about the UK government's ability to meet fiscal targets while maintaining planned spending commitments. Year-to-date borrowing stands at £64.1 billion, £3.3 billion above last year's pace, threatening Chancellor's budget headroom. Market participants are pricing in potential tax increases or spending cuts in the upcoming Autumn Statement. Technical analysis shows GBP/USD breaking below the 1.2700 support level, with next support at 1.2600. Resistance now sits at 1.2720 (former support turned resistance). The pound's weakness could accelerate if UK gilt yields continue rising, reflecting growing investor concerns about the UK's fiscal sustainability and debt trajectory.