UK Recession Fears Growing Following GDP Plunge

<h2>Negative UK Growth Readings</h2>
<p>The British Pound has come under renewed selling pressure today in response to the latest UK data released this morning. The UK GDP figure for March came in at -5.8% on the month, marking the sharpest monthly contraction since the Office for National Statistics began compiling data in 1997. The data release also saw the Q1 reading confirmed at -2%.  It will likely come as little comfort, though it is worth noting that both these figures were a little better than expectations which were -7.2% and -2.5% for the month and quarter respectively.</p>
<p>It is also worth pointing out that while some analysts have been highlighting significantly worse Q1 readings for some European countries, the lock-downs began much earlier there. With this in mind , it is now the Q2 reading which will take on the most importance in terms of assessing the true damage to the UK economy as this will account for a far greater period of the lock-down.</p>
<h2>Doubts Over Recovery</h2>
<p>Furthermore, there has been a sea change in projections for the post lock-down recovery. While many analysts were initially pegging a V-shaped recovery as the most likely course, anticipating a quick bounce back in activity levels, many have since altered their views to a more prolonged and gradual recovery. However, as the BOE themselves noted last week there is a great deal of uncertainty in thus outlook and the true pace of the recovery will depend on how long it takes to re-open all parts of the economy and whether a second wave of the virus can be avoided.</p>
<h2>How Will Consumers React?</h2>
<p>The more challenging sector such as hospitality and leisure present real issues in terms of how to maintain people’s safety while allowing the businesses to operate for profit. While there have been some tentative plans to allow some of these businesses to re-open as early as July, this would be at a greatly reduced capacity which is unlikely to help these businesses achieve a profit until they can re-open fully. There is also a great deal of concern over how consumers will react when businesses begin reopening. Many polls and surveys suggest that the UK consumer is largely reticent to engage with consumer-facing businesses which could stifle the recovery even further, putting more pressure on the economy.</p>
<h2>Technical Views</h2>
<p><strong>EURGBP (Bullish above .8861)</strong></p>
<p>From a technical viewpoint. Following the sharp sell off from March highs, EURGBP has been trapped within a tight range between the yearly pivot (.8692) and the .8861 resistance level. Price is now testing the top of this range once again and, with VWAP having flipped positive, is vulnerable to a break which would put the .9097 yearly R1 in view next.</p>
<p><img class="aligncenter wp-image-43397 size-full" title="UK Recession fears Growing Following GDP Plunge" src="http://blog.tickmill.com/wp-content/uploads/2020/05/EURGBP-3.png" alt="UK Recession fears Growing Following GDP Plunge" width="1198" height="632" srcset="https://blog.tickmill.com/wp-content/uploads/2020/05/EURGBP-3.png 1198w, https://blog.tickmill.com/wp-content/uploads/2020/05/EURGBP-3-300×158.png 300w, https://blog.tickmill.com/wp-content/uploads/2020/05/EURGBP-3-1024×540.png 1024w, https://blog.tickmill.com/wp-content/uploads/2020/05/EURGBP-3-768×405.png 768w" sizes="(max-width: 1198px) 100vw, 1198px" /></p>
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