We noticed a second consecutive contraction for economic growth in the UK this morning. After a sharp fall back in April of -0.3%, forecast suggested an uplift of 0.1% in May. These figures were slightly too optimistic, and its actual numbers came in at -0.1% for May. Largest fall within the sector was recorded from production output, down 0.9% and construction which saw a fall of 0.6%. This will be another setback for the government and chancellor Rachel Reeves whose main priority were to create an uplift for the UK economy while reducing its budget deficit. The contraction in GDP-figures, did see GBP fall in the opening hours – putting more pressure on Bank of England to lower interest rates, for the UK economy to not continuing moving in the wrong direction.
Other than that, it’s a fairly calm day of economic releases. Looking ahead for next week, we start off on Tuesday with US core inflation and inflation levels, who are expected to rise month-on-month. Recent performance from the US showing a more stable job market and healthy economy. If we do see inflation levels grow, we could see a subtle recovery for the USD, which has been under performing its main peers (GBP & EUR).
Similar situation on Wednesday when UK release their inflation levels. UK inflation is still far from its target rate of 2%, seeing it sitting at 3.4% last month. This territory can become problematic if inflation levels don’t start coming down, while we are seeing economic growth retracting – potentially causing stagflation. Bank of England and the government have a lot of work to stabilise the UK market, and in the meantime there is a high chance of uncertainty on GBP – leading to losses.
GBP/EUR 1.1577 GBP/USD 1.3531 GBP/AED 4.9727
GBP/AUD 2.0583 GBP/CHF 1.0781 GBP/CAD 1.8543
GBP/NZD 2.2511 EUR/USD 1.1676 GBP/ZAR 24.1573