UK FISCAL: VAT, "Other Tax" Receipts; Local Authorities Drive PSNB Higher (2/2)
Sep-19 10:42
- Local authorities net borrowing YTD is GBP1.6bln, but this compares to an estimated GBP1.1bln surplus for Apr-Aug, so is now tracking GBP2.8bln above forecast, but previously this was tracking GBP3.3bln below forecast, a swing of GBP6.1bln versus last month's estimate. Of the updated GBP2.8bln overshoot, GBP2.7bln is higher borrowing in August and around GBP3.4bln is from revision from the Apr-Jul numbers. The OBR wrote that these figures are typically "revised significantly ... through the financial year and in subsequent years." Even so, this is a notable revision today.
- Public corporations net borrowing is GBP-3.2bln YTD, GBP2.3bln above forecast - but it was already tracking GBP2.6bln above forecast, so didn't contribute to the overshoot of the OBR's forecast today.
- From the March 2025 profiles, the OBR expects lower borrowing in the second half of 2025-26 (compared to 2024-25), "reflecting a sharp rise in capital gains tax expected around the end-January due date, lower debt interest payments in the second half of the year, and lower growth in central government net social benefits which were unusually backloaded last year." The OBR's commentary also noted a GBP2.0bn downward revision to 2024-25 borrowing.
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SONIA: Calendar spreads are dominating the flows
Aug-20 10:37
Dominating flow in the Sonia strip, not too surprisingly has been in Flatenners following the touch higher UK Inflation.
Aside from the 11k SFIU5Z5 spread that has traded in 11.8k, pushing back Rate cut bets.
- SFIZ5/H6 has traded in 31k spread to the downside.
- SFIZ5/M6 in 22k also to the sell side.
- SFIZ5/Z6 has traded in 51.1k lots, mostly to the sell side.
The SFIZ5/H6, SFIZ5/M6 have seen their largest single moves since the US NFP, but for the SFIZ5/Z6, this the most notable single move since 8th May.
OUTLOOK: Price Signal Summary - GBPUSD Bull Cycle Still In Play
Aug-20 10:36
- In FX, a consolidation mode dominates for now in EURUSD. The trend set up however, remains bullish. A resumption of gains would expose key resistance and the bull trigger at 1.1829, the Jul 1 high. Clearance of this level would resume the uptrend. Support to watch lies at 1.1588, the 50-day EMA. Major support rests at 1.1392, the Aug 1 low.
- The latest pullback in GBPUSD for now, appears corrective and a bullish condition remains intact. Recent gains resulted in a breach of resistance at 1.3589, the Jul 24 high. This signals scope for a climb towards 1.3636, the 76.4% retracement of the bear leg between Jul 1 and Aug 1. Initial firm support to watch is 1.3449, the 50-day EMA. A clear break of it would signal a possible reversal.
- USDJPY remains in consolidation mode. A bearish threat is present as the pair trades closer to its recent lows. Sights are on support at 145.86, the Jul 24 low. Clearance of this level would highlight a stronger S/T reversal and strengthen the bearish engulfing signal on Aug 1. This would open 144.69, a trendline drawn from the Apr 22 low. Initial firm resistance to watch is 148.52, the Aug 12 high.
OPTIONS: Larger FX Option Pipeline
Aug-20 10:35
- EUR/USD: Aug21 $1.1600(E1.3bln), $1.1700(E1.6bln), $1.1750(E2.0bln), $1.1800(E3.0bln); Aug25 $1.1640-55(E2.0bln)
- USD/JPY: Aug21 Y145.95-00($1.2bln), Y146.70-80($1.8bln); Aug22 Y147.90($1.4bln)
- AUD/USD: Aug21 $0.6590-00(A$1.8bln); Aug25 $0.6510-25(A$1.1bln)
