Govt Revenue Soars on Massive Tax Collection; Best Surplus Since July 2008
Shoppers out to beat the Jan. 4th deadline of a higher VAT rate as well as strong seasonal spending saw the government have a cash surplus in January. Consumer actions to beat the government administered tax hike deadline attributed a large portion to the headline figures according to the Office for National Statistics (ONS). The ONS also said that corporations added their share with final payments of income tax for the previous fiscal year and early payments of tax and national-insurance contributions on bank bonuses. However, before jumping on the band wagon we warn traders that January may well be a month of rogue factors producing a better than expected result and state public finances may continue to deteriorated in the next few months.
The pound embarked on something of a relief rally after the release and pared a portion of its substantial over-night decline. We will watch with interest just how long the unexpected surplus numbers can maintain the bid here given that many will conclude that January was a rogue month. Sterling bulls have been visible throughout the month of February so far, but given today’s global macro and geopolitical events we favour net sellers to remain well in control. Bears will target the 1.6100 level to the downside and the 20-day SMA below that at 1.6085.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.