Welcome news regarding the state of UK borrowing has strengthened the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate today. The figures show that George Osborne still has a chance of bringing borrowing for the financial year down to his target of £68.9 billion. Meanwhile, the Australian Dollar is experiencing mixed fortunes, gaining strength on the belief that the Reserve Bank of Australia (RBA) is prepared to weather the storm of worsening global conditions rather than cut interest rates in 2016.
A positive day on the stock markets around the world has strengthened the ‘Aussie’ (AUD) today, as has weakening confidence in the US economy. The Shanghai Composite Index closed 1.25% higher today, while the broad Australia ASX All Ordinaries index rose 52 points, a change of 1.1%. Financial institutions such as banks and insurance providers, as well as energy and mining-related businesses saw strong increases in share price, with minerals exploration, production and processing company BHP seeing particularly large gains of 7.5% as the prospect of Chinese demand grew.
The US Dollar (USD) is softened today by a dawning realisation that the drop in oil prices hasn’t benefitted the US economy in the way that it usually does, with JPMorgan Chase now predicting the price slump knocked -0.3% off US GDP in 2015. This has helped increase appetite for the riskier Australian Dollar.
UK borrowing figures for the public sector, excluding banks backed by the state, dropped from the previous rate of £13.5 billion in November to £7.5 billion in December, coming in -£3 billion under what economists had predicted. The figure represents a drop of -£4.3 billion in borrowing year-on-year (YoY) and shows that monthly borrowing was at its lowest since December 2006. The previous month’s borrowing figures were also revised downwards by £700 million.
After today’s figures the total rate of UK borrowing for the 2015-16 financial period currently stands at £74.2 billion. George Osborne’s target was £74.2 billion, although as of the middle of 2015 economists were forecasting an overshoot of £10 billion by the end of the financial year. January’s borrowing figures will be the key data in deciding whether or not Osborne will meet his target or the less optimistic one set by forecasters. The first month of the year is when self-assessment tax payments are due, so strong tax receipts will lift the pressure on borrowing and could enable Osborne to run a budget surplus, while poor receipts will leave a larger funding gap.
If George Osborne can run a surplus of £5.3 billion during the final financial quarter he will still be able to meet his target of a £68.9 billion deficit.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trading between 2.0221 and 2.0402.
The Australian Consumer Price Index is due for release on Wednesday during the Australasian session. There is currently no forecast for the 2015 inflation rate.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is currently trading between 0.4899 and 0.4943.
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