The pound continued to make gains as GBPEUR interbank market pushed through the 1.12 barrier this morning. Following a 4.37% climb last week, the pound is now at its highest level for more than two weeks, 1.1250 (interbank market) at the time of writing. The UK currency has benefitted as investors found some comfort in actions taken by global central banks to help stabilise the financial markets, most notably the asset purchase programmes launched by the US’s Federal Reserve and UK’s Bank of England.
Some are forecasting the UK economy to contract by as much as 10 percent in the wake of the current coronavirus pandemic but with no end date in sight, many expect the situation to worsen before any recovery is in sight. Ratings agency Fitch downgraded the UK economy on Friday, highlighting concerns about the Government’s plan for dealing with the coronavirus epidemic.
Businesses continue to grind to a halt. Today Easyjet, announced they were grounding their entire fleet, following their final rescue flight on Sunday. All cabin crew will now be placed on the Government’s Furlong retention scheme, whereby they’ll receive 80% of their salaries from the 1st April.
Is a Recession Unavoidable?
The Centre for Economics and Business Research (CEBR) say a deep recession is now all but unavoidable as businesses close shop and consumer spending falls off a cliff. The centre said it expected GDP growth for the first quarter to have contracted 0.5 percent and anticipating quarter two growth to be the biggest quarterly contraction since records began, more than 20 years ago.
Japan’s Nomura Bank has also predicted UK unemployment will double in Q2 to 8 percent, and site government plans for a not more rapid rise. However, they expect unemployment to continue to rise in Q3 up to 8.4 percent.
Most expect the UK economy to bounce back strongly and at speed, when the time eventually comes.
In Europe, economic sentiment saw its fastest ever fall, recording its lowest reading since 2013, although much of this data was gathered a few weeks ago so these numbers likely appear more friendly and less reflective of today’s environment.
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