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Market Update

Sterling retreated against a broadly firmer dollar, as investors awaited confirmation of the government’s spending plans to lift an economy that posted its biggest contraction in 40 years in early-2020.

The pound is already under pressure from fears that Britain will fail to clinch a trade deal with the European Union by the end-2020 deadline. Today is the last day it can request an extension to the transition period, but it has refused to do so.

Meanwhile Britain’s economy shrank by the most since 1979 in the first 2020 quarter as households slashed their spending, according to official data that included the first few days of the novel coronavirus lockdown.

Gross domestic product dropped by a quarterly 2.2%, below the 2% median forecast in a Reuters poll of economists. In the first six months of the year. Britain’s economy may have contracted by 20%, the Bank of England has warned.

The currency has fallen more than 7% so far this year against the dollar.

Britain has imposed a stringent lockdown on the English city of Leicester following a local flare-up of the novel coronavirus.

In Leicester, in the eastern Midlands of England, the seven-day infection rate was 135 cases per 100,000 people, three times higher than the next highest city.

Leicester accounted for 10% of all positive cases in England in the past week, the government said.

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