Yesterday, the Prime Minister and President Biden reached a ground-breaking economic partnership that marks a significant milestone in the relationship between the UK and US. Known as the 'Atlantic Declaration,' this agreement signifies a new chapter in the flourishing economic ties between the UK and US. It builds upon a history of extensive collaboration in defense and security, applying the same principle to our economic alliance. This partnership encompasses a wide range of areas, including economics, technology, commerce, and trade, and reflects a closer level of cooperation than ever before.
We are not sure what to believe in regards to UK economic growth anymore as the so called experts are constantly changing their opinion. However New analysis has uncovered that the UK's economy is projected to experience the second weakest growth among the advanced economies of the G7 this year. The only country expected to perform worse is Germany, which entered a recession at the beginning of the year and is anticipated to remain stagnant throughout 2023. According to the Organisation for Economic Co-operation and Development (OECD), the UK's GDP is predicted to show minimal growth of 0.3% this year, with a moderate improvement to 1% growth in 2024. However, this growth comes alongside the unfortunate prediction of rising unemployment, with an estimated rate of 4.5% expected to be reached in the following year.
On the back of this news, and following suit with Germany the whole Eurozone has entered a recession following significant downturns observed in several of its major member economies. The 20-country bloc, known for adopting a single currency and implementing centralized policies across the region, faced a contraction of 0.1% in the first quarter of this year.
The OECD have also said that the UK is expected to have one of the highest inflation rates among the G20 nations this year. However, the country is anticipated to narrowly avoid entering a recession. The OECD, based in Paris and composed of wealthy nations, highlighted that UK inflation in 2023 will be higher than most G20 members, with the exceptions being Argentina and Turkey. Nevertheless, when considering the broader membership of the OECD, the UK's inflation rate, while elevated, will still be surpassed by several other countries such as Sweden and Iceland. The report also cautioned that the likelihood of higher interest rates in the future may dampen economic growth and income levels in the coming months.
The Eurozone has entered a recession following significant downturns observed in several of its major member economies. The 20-country bloc, known for adopting a single currency and implementing centralized policies across the region, faced a contraction of 0.1% in the first quarter of this year.
A number of Banks and lenders pulled their cheapest mortgage rates this year as the BOE ponder whether to hike rates further at their next meeting this month. Chancellor Jeremy Hunt has backed the BOE to hike interest rates if need be, to counter high inflation. MP’s have also told banks they must increase rates paid out to customers on savings as some banks are still only paying 0.25% on savings!
The news of further rate hikes coupled with worries in the US regarding the strong consumer sector fading away saw the pound rise across the board, and the dollar lose ground.
Have a great weekend.