After a strong start to the day, the pound weakened slightly yesterday as Brexit talks resumed in Brussels. Positive rhetoric from last week was given a reality check as Michael Roth, Germany’s Europe Minister, said it was not helpful to “play games” during the negotiations and that, instead “British pragmatism” was needed to reach a deal.
Comments from the Governor of the Bank of England, Andrew Bailey, also caused sterling to weaken slightly. He said that the MPC has an open mind about whether and when to cut the interest rate to zero or below.
The number of mortgages approved for house purchase in the United Kingdom jumped to 84,700 in August, easily beating forecasts of 71,000 thousand. This was the highest number of approvals since October 2007 but it only partially offset weakness seen between March and June.
This morning, GDP figures have been released. They show that the British economy shrank 19.8% on quarter in the three months to June of 2020, slightly less than a preliminary estimate of a 20.4% drop. Year-on-year, the economy shrank 21.5% in the second quarter of this year. These mark the biggest contractions on record and signal that the economy is in recession.
