U.K. budget surplus expands year-on-year in July

The U.K. public finances saw net borrowing of less than GBP 40 billion last financial year. This was the lowest level in 11 years and nearly GBP 6 billion lower compared to the official OBR expectation. The rebounding trend, in the recent months, appears to have been maintained, with the July figures indicating a net surplus of GBP 2 billion, GBP 1 billion greater than one year earlier and the highest for that month in 18 years.

Accrued receipts in July usually get a boost from self-assessment income tax payments, and there was no exception this year. Revenue in this category was the highest since records started in 1999, fully accounting for the GBP 1 billion increase in the surplus. Other tax receipts were also stronger, by GBP 0.4 billion in PAYE and GBP 0.3 billion in the VAT category. Nevertheless, their effect was partially countered by a rise of GBP 0.8 billion in department expenditure, noted Daiwa Capital Market Research in a report.

In the initial four months of the current financial year, public sector net borrowing was below GBP 13 billion, which represents a decline in net borrowing of GBP 8.5 billion from the equivalent period last year. These figures are quite volatile and so it appears premature to make any full-year predictions. However, with the OBR expecting this year’s borrowing to be slightly changed from FY17/18, the data so far seem to be on track for another positive surprise.

At 19:00 GMT the FxWirePro's Hourly Strength Index of British Pound was highly bullish at 102.852, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -51.1099. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex