Credit Suisse has said that US GDP could crash by 33.5 per cent in the next quarter, the largest contraction in history, as the coronavirus pandemic takes grip of the US economy. The quarterly drop would be the largest on record since 1945. By comparison, during the 2008 financial crisis, the worst drop was 8.4 per cent, which pales into significance against this latest forecast. On an annual basis (calendar year), Credit Suisse predicts a 5.3 per cent contraction. To put this into context, there was only a 2.8 per cent decline in the 2008 financial crisis. However, the bank anticipates a quick recovery in quarters 3 and 4 of this year with GDP growing at 19 per cent and 11 per cent respectively.
Will the Us Go Into Recession?
The US faces an all but certain recession as business and consumer activity has ground to a halt following the lockdown in the US. The US has now reported around 350,000 coronavirus cases and more than 10,000 deaths and those numbers are set to rise.
Boris Johnson still in Intensive Care
In the UK, prime minister Boris Johnson has been moved to intensive care as his coronavirus condition worsened. The government confirmed Mr Johnson suffered breathing difficulties and was provided with oxygen at St Thomas’ Hospital last night. The Foreign Secretary, Dominic Raab has taken the reigns although Raab does not enjoy the same support as Johnson and has been a divisive figure in the past, most notably for his stance on Brexit. With Boris away from his post, there are questions over power within the cabinet as ministers and Dominic Cummings likely position themselves for control. The absence of the prime minister could weigh heap pressure on the pound and sterling could find itself coming under some selling pressure.
GBPUSD is 0.5% down over the week and by comparison to previous weeks, has traded in a relatively slim trading range but that could change quickly as investors continue to monitor coronavirus cases and the impact on the global economy. On an encouraging note, there are signs that coronavirus numbers in the eurozone are slowing although frankly, it’s too early to tell.
If you’d like to discuss these factors and how they could impact your currency exchange, you can reach me directly using the form below.