Markets increasingly 'fretful' about UK economic stability ahead of GDP print on Friday
Markets are increasingly fretful about the UK's apparent inability to pass even modest spending cuts.
Labour MPs revolted against the trimming of welfare spending proposed by their government, and the unpleasant reaction in long-end gilts provided a second stinging rebuke to Starmer.
This means that more tax increases are almost certainly on the way in the autumn, at a time when the UK labour market is already slowing down. On the other hand, the pound has also fallen markedly against the euro, suggesting to us that the currency may be close to fair price.
This week’s slate of macroeconomic data, notably industrial production, construction and trade will probably be of limited impact given the time lags.
We will, however, be paying close attention to Friday’s monthly GDP print for May, which is expected to show only very modest expansion following the April contraction.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
