Preliminary GDP figures this morning showed that the economy contracted 0.2% , marking the first step towards a recession. Despite this the pound held its ground across the board.
Jeremy Hunt has warned he will be making “eye-watering” decisions after the economy shrank in what is feared to be the beginning of the longest recession on record. The chancellor said the government would be forced to take “extremely difficult decisions to restore confidence and economic stability”, but insisted that the “fundamental resilience of the British economy is cause for optimism in the long run.
The past few days have seen the Dollar lose significant recent gains, as better than expected inflation data has reduced the chances of a FED interest rate hike.
JPY rose 4% against the dollar after the news and the EURO made its largest daily gain since 2020. The pound also rose by around 3.5% over the past 2 days.
The US inflation figures have been a key issue during the midterms, and although they were positive this week they are still at a decade high. Biden is using the data as a sign that his administration is making progress o bringing costs down, and says that the data shows signs of economic strength. As it stands republicans are ahead in terms of taking the House of Representatives and Lower chamber of congress, however the battle for the Senate is too close to call.
Rising Inflation, the energy crisis and rising interest rates are putting around 50 of the worlds poorest countries at risk of bankruptcy, unless the worlds richest countries intervene according to Achim Steiner, the UN’s global development chief.
GBPUSD resides at 1.1755
GBPEUR resides at 1.1425
EURUSD resides at 1.0287