It’s been another difficult week for the UK economy. Figures released this week showed that in April, the UK economy shrank by 0.3%, following on from the 0.1% contraction in March.
This has led to a number of influential figures including a former Chancellor suggesting the UK was almost certainly headed for a recession.
We saw further data released showing stagnation in the jobs market, with a record high of vacant jobs yet minimal pay increases. Combined with inflation at over 8% now, we’re seeing de facto pay cuts across the board.
This week also saw petrol prices continue to rise unchallenged, one news article suggested that they’d gone up every single day for the last month.
All this is set against the decision by the Bank of England yesterday to raise interest rates to 1.25% and declare that it expected inflation to now hit 11% in the Autumn.
There is speculation that we could therefore see Interest Rates rise to around the 3% mark. (The OBR has said that they will need to be at 3.5% if the economy keeps worsening.)
Combined this has all led to the Pound losing further ground against the Dollar, hitting the $1.20 mark on Tuesday before making a slow climb back up a couple of points. This is set against the Fed’s decision earlier in the week to raise US Interest Rates by 0.75%, the biggest single rise in nearly 30 years.
Against the Euro, similar to the Dollar, we saw a dramatic drop on Tuesday following the announcement by Nicola Sturgeon that she planned on holding another referendum on Scottish independence in October next year. The Pound made it back up again later on in the week and once again pretty much ended the week where it began.
The other big piece of currency news this week comes in the Euro-US Dollar pairing, the Euro has continued a steady decline over a week or so, hitting as low as $1.04 mid-week. According to analysts at Wells Fargo, we could see parity within a month.
The final story this week comes out of the stock market and is a developing one at the time of writing. As the week comes to an end, we are set to see the worst week of trading on the stock markets around the world since March 2020 and the beginning of the pandemic. This is largely due to gloomy predictions from the world’s various central banks and fears of recession.
To finish on a lighter note (for the UK), because of the ongoing war in Ukraine, Britain looks set to host the Eurovision Song Contest. The European Broadcasting Union announced this morning that due to safety concerns, it wouldn’t be possible for the contest to be held in Ukraine and therefore it was in contact with the BBC to discuss the UK hosting for the first time since the late ’90s. Speculation is rife and it has been suggested that it could be held in Glasgow next May.