On Friday morning the UK had it’s GDP release that showed a contraction of 0.1% (Growth of -0.1%) for the last quarter which was slightly better than what markets were predicting. On the back of this, we saw Sterling maintain some strength through Friday, with a few pitfalls against the Euro through the session.
Though the data was not as bad as expected, it is important to note it was still a negative quarter and there was a contraction, if we get one more quarter of this then we will be technically in a recession as predicted by the Bank of England. The reality of the next quarter is all of the talks of recession and rising household bills will result in the average consumer spending less and retaining as much cash as possible in case of hard times. This will help fuel a recession as people spend less on luxuries.
Moving onto this week, we have UK employment data out on Tuesday- we are expected to see the unemployment rate to remain unchanged at 3.8% but we are expecting to see a lower number in employment change of 253k- which will show that the job market is cooling- this is most probably due to the fact that the UK is approaching “full employment” so it is not necessarily a bad thing- will just be worth keeping an eye on it the number remains lower over the coming months.
On Wednesday we have UK inflation data, which is expected to show a rise to 9.8% (A rise of 0.4%)- if we do see a higher number then this will undoubtedly encourage the Bank of England to raise interest rates again in September, I am unsure if this is good for the Pound as the BoE are definitely hiking their way into recession, so this could result in Pound weakness.