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UK Public Sector Borrowing Casts Doubts on Deficit Target

UK Public Sector Borrowing Casts Doubts on Deficit Target

Benjamin Spier, Technical Strategist

THE TAKEAWAY: UK Public Sector Borrowing at 14.4 billion Pounds in August -> Government may miss deficit target due to weak economy -> Sterling rallies

The UK public sector borrowed 14.4 billion Pounds in August 2012 (excluding interventions), which was slightly less than the forecasted 15.0 billion public sector net borrowing, and higher than July’s revised 0.1 billion Pounds borrowed. August’s borrowing brought the public sector’s net debt up to 1,039.5 billion Pounds, which is 66.1% of the UK GDP, according to the Office for National Statistics.

The UK public sector saw a budget deficit of 13.2 billion Pounds in August, which was 0.4 billion Pounds higher than the deficit in August 2011.

The weak UK economy has made it harder for Chancellor of the Exchequer George Osborne to achieve his goal of bringing down the debt in three years. BoE Governor Mervyn King said it would be acceptable for the government to miss its debt target cause of the weak economic output.

However, the month’s borrowing was not as bad as expected, and therefore sent the Sterling higher. GBPUSD climbed above 1.6300 following the release, and set a new yearly high at 1.6309.

GBPUSD 15-minute: September 21, 2012

UK_Public_Sector_Borrowing_Casts_Doubts_on_Deficit_Target_body_gbpusd.png, UK Public Sector Borrowing Casts Doubts on Deficit Target

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