Search ForexCrunch

The UK will suffer the heaviest Covid-19 impact of any major country this week as signs of faltering spending raise fears that the recovery is already running out of steam…

Economy shrinks by 23pc over the first half of 2020 due to drop in consumer spending during lockdown.

 – The Telegraph reported. 

Market implications

The week ahead holds two critical data points.

We will have the Labour market data as well as Gross Domestic Product.

As for GDP, the services sector (80% of the UK economy) remains the big unknown through June (we forecast 7% m/m for IoS), but after May’s disappointment, some catch-up is inevitable, with IP and Construction helping support growth too (both at 10% m/m), analysts at TD Securities explained. 

We still look for a dire 20Q2 growth number, however, roughly in line with the BoE’s recent -21% QoQ estimate.

For the time being, the dollar is on the back foot, but that could all come undone vs the pound as the UK ‘s economic issues move back to the fore as prospects of negative rates swell.