China’s continued lockdowns threaten global growth

GBP

The pound continued its losing streak on Tuesday as global investor sentiment turned sour and fears of the UK economy could suffer a recession are increasing. In addition, Sterling was pushed down further by a stronger US dollar benefitting from safe-haven flow.

The pound is currently one of the worst performing of the world’s major currencies. It is currently trading at two year lows against the US dollar. Signs of slow growth and a subdued Bank of England are also weighing on the British currency. The main factors as to why the UK could be heading into a recession is that the cost of living has increased along with household spending being reduced. Furthermore, business confidence is lower and real wages are meanwhile forecast to shrink by 4% in 2022 in what amounts to one of the worst real term cuts to pay packets since the Second World War.

The pound is traditionally a ‘risk off’ currency that loses value when global stock markets are falling and general investor sentiment is poor. Fears of a major global growth slowdown in light of increasing lockdowns in China are currently said by analysts to be the main driver of the latest investor gloom.

Key announcements

17:00 – EUR – ECB President Lagarde speaks