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Weekly Roundup: Pound crumples as UK faces deep recession

currency-newsWeekly Roundup: Pound crumples as UK faces deep recession
The pound began selling off early last week as economists at Goldman Sachs added to a growing number of voices predicting a UK recession beginning this year.

Goldman also warned that UK inflation could surge to 22% next year if energy prices continue to climb.

Increased anxiety over the state of the UK’s public finances also hurt Sterling. Rising interest rates and expectations of another cost-of-living spending package saw government borrowing costs surge, with UK bond yields hitting an eight-year high. The pound refreshed multi-year lows against many of its peers.

GBP remained under pressure through to the end of the week. The Resolution Foundation released new research saying that rising energy bills could push 3 million more people into poverty in the UK.

The British Chambers of Commerce (BCC) then said that it believes the UK is already in a recession, urging the government to act as ‘time is fast running out’.

After initially slipping to fresh lows this week Sterling has bounced back, seemingly having entered oversold conditions, as markets digest Liz Truss’s victory in the Tory leadership contest.

Truss now faces a daunting task. The new PM is likely to announce urgent policy action to tackle the country’s cost-of-living crisis, and this could support Sterling.

However, some economists are concerned that Truss’s key policies could push inflation even higher while forcing the Bank of England (BoE) to continue aggressively hiking interest rates. If these concerns persist, GBP may continue to languish near recent lows.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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