UK GDP shrank by 2% compared to the previous quarter, figures released this morning show. Representing a yearly fall of 1.6%, it is not good news for the economy, but, in a small glimmer of positivity, is not as much of a drop as expected. Nonetheless, the pound has still weakened on the news.
The pound had already dipped against the euro yesterday after a senior Bank of England policymaker appeared to hint that negative interest rates are not totally out of the question, with further pressure put on this morning by poor GDP data. Ben Broadbent, who is the BoE’s Deputy Governor of Monetary Policy, said to CNN that more ‘easing’ is likely to come. Asked about negative interest rates, he said they would likely end up doing ‘more harm than good’ – but by not dismissing them, some investors believe this means they could still be on the table.
Further pressure came as the UK’s Rishi Sunak extended the furlough scheme until past summer. Although the scheme should help struggling businesses, it also an admission that the crisis is expected to last quite some time yet.
