Grim economic situation in the UK offsets sensible fiscal policy – Commerzbank

Chancellor Jeremy Hunt did not cause a collapse of Sterling with his statement, but only damaged it. Bleak economic outlook dampens the prospects of the GBP, economists at Commerzbank report. 

Economically speaking things are not looking good for the UK

“Economically speaking things are not looking good for the UK. Hunt estimates that the economy is already in recession now and is therefore more pessimistic than the median of analysts. Hunt even expects a contraction of 1.4% in UK GDP (median of analysts: -0.5%). The island does not need a gas crisis to achieve that.”

“The fact that Sterling was able to stand up well also against the euro (good GBPUSD performance is not that difficult thanks to the collapse of the Dollar) might have been due to the fact that many thought a return to sensible fiscal policy might provide an additional boost for the UK currency. That did not happen though.” 

“The market is clever enough to consider sensible fiscal policy to be a necessary condition for Sterling stability and to also consider the economic situation (and the results of the BoE’s monetary policy) for its GBP valuation.”