UK on Brink of Double-Dip Recession Analysis: 15th January 2021

UK on brink of double-dip recession after 2.6% GDP fall 

GDP fell 2.6% at the height of lockdown 2.0 in November, putting the UK economy on course for the first double-dip recession since 2010. 

The contraction is lower than the City forecast of 5.7% but puts output 8.5% lower than February 2020 when the pandemic hit, with services sectors taking a battering. 

The grim if inevitable update, comes after London’s top shares yesterday broke their three-day losing streak ending at 6,801.96, a 56.44-point or 0.8% rise.  

Markets across Asia and Europe shrugged off President-elect Joe Biden’s $1.9 trillion coronavirus relief plan to tackle a “once-in-several-generation public health crisis.” 

A Financial Times survey of economists showed that most companies do not expect to reach pre-pandemic levels of business until at least late in 2022. 

Rishi Sunak, chancellor of the exchequer, said: “It’s clear things will get harder before they get better and today’s figures highlight the scale of the challenge we face.” 

Monthly GDP data are not available for most countries, but industrial production figures have shown that the eurozone has recovered to levels similar to those in November 2019, while industrial output was 4.7 per cent down in the UK.  

UK Covid-19 Update 

The latest Covid-19 data continues to show the UK ravaged by the virus, although the vaccination program is well underway with over 2.9 million people having had the first shot of the vaccine. The government has set a goal of vaccinating 15 million people by mid-February, with the program expected to ramp up in the very near future. The government has already said that these numbers need to be made before they discuss measures to take the UK out of lockdown. 

What does this mean for the GBP? 

The British pound sterling (GBP) is the fourth most widely traded currency in the world, behind the U.S. dollar (USD), euro (EUR), and Japanese yen (JPY). The GBP also ranks third in globally held reserves. GBP traders speculate on strength and weakness through currency pairs that establish comparative value in real-time.  

With the current situation in the UK, keep an eye on GBP Crosses for an opportunity to trade. 

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