Commenting on sterling’s reaction as UK narrowly avoids recession

Commenting on sterling’s reaction as UK narrowly avoids recession, Andy Scott, Associate Director at JCRA, said: “The UK economy avoided recession after growth rebounded in the third quarter, but the weakest annual pace of growth in almost a decade highlights how Brexit continues to slow economic activity.

“Today’s data contains nothing particularly surprising and hence sterling barely reacted with a shrug. The continual delay to the Brexit process means the UK remains an uncertain environment to invest in for businesses, which results in slower growth. The fact that a general election is under way in the fourth quarter, with the risk of either a hung parliament, or potentially a socialist Labour party forming a coalition government, suggests a further deceleration or stagnation as we close out 2019. While the fog of Brexit hangs in the air, the clouds over the economy continue to darken.

“Sterling meanwhile has taken the decision to have an early general election and the news that two Bank of England members voted for a rate cut last week, largely in its stride. Sterling is currently trading at 1.28 versus the Dollar, down only 2 cents from a five-month high reached last month, while it is trading at 1.16 versus the Euro, less than half a cent from its recent highs. The next test for GBP investors is now only a month away, what to do if the betting odds are right and the most likely outcome is a hung parliament? While UK politics has been far from functional of late, increased instability in Westminster would surely cause even the most optimistic GBP bulls to rethink and retreat!”