UK Borrowing Increases leading to a Sterling slump – 23rd December 2015

Could it be the fault of the likes of Netflix and Cadbury, companies reported to have avoided paying tax to the UK Chancellor of the Exchequer, for the increase in UK borrowing? Collecting taxes from such companies would certainly reduce the amount the chancellor is borrowing which in November was £13.6 billion, more than the forecast £11 billion. In his budget he allowed himself £73.5 billion of net borrowings but he has already borrowed of £66.9 billion, leaving himself with £6.6 billion until April – or £1.7 billion a month.

Investors were not impressed. Even before the public sector borrowing figures had come out they were inclined to lean on Sterling so when the borrowing numbers were revealed. the pressure increased. It meant to Sterling falling by an average of -0.5% against the other dozen most actively-traded currencies. At the top of the leaderboard, for second day in a row, was the Swedish Krona strengthening by 1% against the struggling Pound on the back of better-than-expected Swedish retail sales data.

In the US, gross domestic product data were roughly in line with the annualised growth of 2.1% shown in earlier data for the third quarter. At 2.0% the expansion was equivalent to quarterly growth of 0.5%: It would still have been 0.5% if the figure had been left at 2.1%.

France has already announced this morning that its economy expanded by 0.3% in Q3. The UK figure at half past nine is forecast to confirm growth of 0.5%. The important number after lunch will be the unpredictable US durable goods orders. There are also US data for personal income and spending, consumer confidence and new home sales after lunch but it is the durable goods orders number that carries the most clout. A monthly decline of -0.7% is forecast, with an increase of 0.1% when transportation items have been stripped out. Canadian retail sales come out at the same time.

Sterling has been looking a little perkier overnight than it did yesterday morning. A GDP figure that meets expectations could help it regain more ground. But woe betide sterling if the GDP data disappoint.