Is the UK heading for a recession

25 July, 2016

Grace Rae

Last week we saw the rates stay quite stagnant with not a lot of momentous market movements. However, this all changed on Friday morning when the Pound took a dive after data showed a post brexit slump. The drop in rates was a result of UK Markit Services and Manufacturing PMI figures for July which contracted quite significantly worse than expected. The Markit’s purchasing managers index for July came in at 47.7, down from 52.1. The lowest reading since April 2009. GBP/EUR fell by 90pips and GBP/USD fell by more than a cent in value almost immediately.

These recent UK PMI data readings points to tougher times ahead. The Bank of England could well cut interest rates next month and with these recent figures not suggesting a ‘bounce back’ anytime soon, this supports the idea that GBP/EUR could potentially reach levels trading at 1.10 by the end of the year.

The news has sparked numerous market analysts to suggest the comeback of a recession.

Peter Dixon, London-based global economist at Germany’s Commerzbank – ‘We’ll get a recession’, “I think we’ll get a recession, but it’ll be a shallow one. But yes, we are in for a prolonged period of sluggish growth,”
Neil Wilson, Markets Analyst at ETX Capital – “The readings suggest we are heading for a recession again and it is almost certain the Bank of England will pull the trigger on aggressive stimulus to boost aggregate demand.
Samuel Tombs, Chief UK economist at Pantheon Macroeconomics – “Woeful PMI points to a 50bp cut in Bank Rate to 0% in August”

With the current UK outlook not being a positive one, those who have a requirement due in the next 6 months, it may be worth contacting your broker or a member of the team here at Currency Index and secure your requirement on a forward contract. Securing your currency with a just a 10% deposit and eliminating anymore risk and potential further losses.

If you have any concerns and want to discuss your options then please do call in today, we will be happy to talk through your options to secure your currency needs.

The week ahead:
08:30 NZD RBNZ Governor Wheeler Speech
15:30 USD Dallas Fed Manufacturing Business Index
23:45 NZD Exports, Trade Balance & Imports

14:45 USD Markit Services PMI
14:45 USD Markit PMI Composite
15:00 USD Consumer Confidence
15:00 USD New Homes Sales

02:30 AUD Consumer Price Index
02:30 AUD RBA Trimmed Mean CPI
09:30 GBP Gross Domestic Product (Q2)
13:30 USD Durable Goods Orders
15:00 USD Pending Homes Sales
19:00 USD Fed’s Monetary Policy Statement
19:00 USD Fed Interest Rate Decision

10:00 EUR Services Sentiment
10:00 EUR Consumer Confidence
10:00 EUR Industrial Confidence
10:00 EUR Business Climate
10:00 EUR Economic Sentiment Indicator
13:30 USD Initial Jobless Claims

00:05 GBP Gfk Consumer Confidence
09:30 GBP Consumer Credit
09:30 GBP Mortgage Approvals