UK Borrowing Yet More Money!
It has been confirmed by the Office for National Statistics (ONS) that the levels of Government borrowing rose over the last 12 months reaching a worryingly high figure of £118.8bn borrowed. This is both slightly surprising and also concerning for the UK as we had previously heard Chancellor George Osborne confirm that governmental borrowing was being reduced. With borrowing so high, it currently stands at 75.2% of our Gross Domestic Product, it puts a lot of pressure on the government and the economy as this money will need to be repaid and currently interest rates on borrowed funds are not overly favourable meaning the more and the longer the country borrows the longer the financial issues for this country are likely to continue. Chancellor Osborne will soon have an opportunity to make amends though as next week he will be holding a spending review for 2015-16, however he will need to find savings of £11.5bn from government departments which could mean we are soon to see more job losses and department closures which is unlikely to be positive in the short term but a necessity for the long term health of the country. In the meantime the recent positive economic data for the UK has been slightly tarnished by this news but I doubt that it will significantly damage sterling exchange rates in the short term but it does highlight just how important next Wednesday’s spending review will be and how much financial pressure the UK government remains under.
EU Finance Minister Split
Following talks of over 20 hours on Saturday EU finance ministers were unable to agree on how to rescue troubled European banks. The talks focused on whether savers should bear any of the costs for bailing out the banks, which was an idea originally discussed and heavily opposed in Cyprus earlier this year but did go through with a tax levied on savers who held large deposits with the banks. Billions have been spent to help ailing nations and their banking systems and there are no definite signs that the need for bailouts is over so these talks could dictate the future of any possible recue packages. As a result the talks are very important which is probably why they have taken so long and are still at an impasse. The results of these ongoing talks could have an impact on the currency markets so for the latest news make sure you stay in contact with your knowledgeable currency trader here at Foreign Currency Direct plc.
Banks Approach Must Change
According to the Bank for International Settlements (BIS) has stated that central banks of the world should not continue with their ‘do whatever it takes’ policies and instead should look for strong sustainable growth without jeopardising the financial stability of their economies. These comments come after the FED stated they would begin to reduce their Quantitative Easing (QE) programme which led to a lot of market volatility. The BIS stated that although they believed we are through the worst of the credit crisis self sustaining growth still eluded the global economy. So, while it is positive that the BIS believe we are through the worst of the financial issues there is clearly still pressure on the central banks which could lead to them being stuck between a rock and a hard place and having to make some very difficult decisions. The central banks have so far come up with some innovative solutions to aid their economies, some more successful than others, but it appears that the message from the BIS is that creative financial ideas may not be the answer and that focus should always remain on sustainable growth. Whether the central banks will listen to the oldest financial institution will be interesting.
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