UK Public Sector Net Borrowing Beats Expectations

THE TAKEAWAY: UK Public Sector Net Borrowing at 12.8 billion in September -> Borrowing to GDP at 69.7% -> Sterling trading steady

The UK budget deficit dropped to 12.8 billion Pounds (excluding interventions) following the 13.5 billion Pound deficit from September 2011. The Public Sector Net Borrowing number, which is released by the UK Office for National Statistics, was better than the median estimate of 13.5 billion Pounds.

The total public sector net debt was 1,065.4 billion Pounds at the end of September which is about 67.9% of the UK GDP. A higher deficit to GDP amount has the potential to drive up borrowing costs in the UK. However, because of the UK economy’s safer status when compared to the nearby Euro-zone, borrowing costs have been kept low by investors looking for a safe haven for their money.

Therefore, the Pound did not react significantly to the better than expected public sector borrowing numbers. GBPUSD continues to trade around 1.6050 after yesterday’s decline that followed weak US market news.

GBPUSD 15-minute: October 19, 2012

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