UK: Smallest budget deficit in 17 years - BBH

In the UK, budget figures showed the smallest deficit for the month of December in 17 years as VAT receipts rose to a record and UK received a large credit from the EU, notes the research team at BBH.  

Key Quotes

“The data did not do much for sterling, which is trading near $1.3945 after briefly poking above $1.40 in early Asia, the highest since the UK referendum.  Rather than being seen as a breakout, it appears to have been greeted with profit-taking.”

“The week's highlights lie ahead.  Tomorrow the UK reports employment (earnings growth is expected to be unchanged at 2.5% including bonuses and 2.3% without).  The first look at Q4 GDP will be reported ahead of the weekend (0.4% q/q for a 1.4% y/y pace, down from 1.7%).  Thursday is the ECB meeting.  Since it met last, December inflation was reported softer than expected and the euro has appreciated.  On the other hand, oil prices have also risen.  Draghi is likely to reiterate the ECB's stance that despite the impressive and broadening expansion, prices are not yet on a sustainable and durable path to the target.  Continued monetary support is necessary.”