GBP/USD has edged lower in the Friday session, repeating the trend seen on Thursday. Currently, the pair is trading at 1.2756, down 0.26% on the day. In economic news, it’s a quiet end to the week. British Nationwide HPI improved to 0.3%, above the estimate of 0.1%. In the U.S., Chicago PMI is expected to edge up to 58.6 points.
It is no secret that a hard Brexit will cause a significant downturn in the British economy. This was reiterated on Wednesday by the BoE financial stability report. The report painted a dismal economic picture if Britain and the EU cannot reach a withdrawal agreement. The BoE warned that a no-deal Brexit would cause the economy to decline by 8 percent, with unemployment rising to 7.5 percent and interest rates jumping to 4 percent. As well, the British pound could shrink by some 25 percent. Bottom line? A hard Brexit would be disastrous for the British economy, triggering a recession worse than the one triggered by the financial crisis back in 2008. On the brighter side, the report noted that GDP would actually rise if the U.K. maintained close economic links with the continent after Brexit.
Money FM View from London with Craig Erlam
G-20 leaders have gathered in Argentina for their annual summit, but it’s a critical one-on-one meeting that has the attention of the markets. President Trump and Chinese President Xi Jinping will have a dinner meeting on Saturday. The full-blown trade war between China and the U.S. has taken a bite out of both economies and threatens to derail global economic growth. Will the sides make some progress, or will Trump make good on his threat to slap China with higher tariffs? Given Trump’s unpredictability, it’s anyone’s guess how the meeting will go, but good or bad, traders can expect the equity and currency markets to respond on Monday.
