UK likely to face severe recession

Hi everyone,

After it was confirmed over the weekend that Germany are now in a recession following France & Italy. UK Chancellor Rishi Sunak indicated "we are likely to face a severe recession, the likes of which we have not seen". Initially, there was talk of a 'v-shaped recession', meaning a sharp drop followed by a swift recovery. However, analysts are now predicting a prolonged 'u-shaped recession', which is a much more problematic and uncertain recovery.

The UK will formally enter a recession around mid-July when Q2 will show an economic contraction because of the lock-down. Usually the 'R' word would mean catastrophe for the currency used in the country, however all nations are in the same boat. What the market will look for is how deep the recession will be, at what cost and how quickly countries can move out to determine the true value of a currency.

Most data-houses are expecting Sterling to weaken overall in the next 6-weeks, as the upcoming Brexit extension date draws closer. As we have said many times, if an extension is agreed, the Pound will rally as there will be more time to negotiate a deal. If not, it will be a very nervous rest of the year for all £ sellers.  




Upcoming Data


Wednesday, 20th May, 2020

18:00 US - FOMC minutes

Thursday, 21st May, 2020

08:30 UK - PMI
12:30 US - Initial & continuing jobless claims
13:45 US - PMI
14:00 US - Existing home sales
18:30 US - Fed Chaor Powell speech

Friday, 22nd May, 2020

06:00 UK - Retail sales & public borrowing
07:30 EU - German PMI
08:00 EU - PMI
11:30 EU - ECB policy meeting



Ian Daly
Trading Floor Manger



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