Die. In an unequal battle, Lettuce defeated Liz Truss. Without spending two months in office, she resigned as Prime Minister of the United Kingdom. However, the day before, she said that she is a fighter, not a giver. Will the country face a new wave of political uncertainty?
Judging by the reaction of the markets, the risk is low. Additionally, the replacement of Liz Truss was announced prior to the release of the new financial plan. So it is not surprising that profitability doctrine -As British bonds are known – after 10 years, they fell to less than 4%. On the other hand, the pound is back above $1.13.
Given the difficult economic situation that Rishi Sunak, his replacement, is inheriting, optimism may be premature and fleeting. Britain’s Business Activity Index (PMI) fell two points to 47.1 in October, the lowest in nearly two years. According to the latest official data, the country’s production decreased by 0.3% in the second quarter compared to the previous quarter.
Given the difficult economic situation that Rishi Sunak, his replacement, is inheriting, optimism may be premature and fleeting.
Goldman Sachs predicts this The British economy will enter a recession in the last quarter of this year. According to preliminary estimates, UK GDP could fall by 1% by mid-2023. Political stability is good news, but it will not be enough to save the economy.
Talking about The challenges that the new Prime Minister will face, we can highlight: double-digit inflation, the energy crisis, a decrease in the flow of foreign tourists or social discontent. As for the latter, the country still suffers from railway strikes.
What else is worth looking at? Starting next week The Bank of England will launch a quantitative tightening program (QT, short for quantitative tightening). The supervisory authority will cut off the balance of government bonds, amounting to 838 thousand million pounds. It is worth noting that the QT will only affect British debt with short and medium maturities.
And how are things in the rest of Europe? In the past month, France, Germany, Belgium, the Czech Republic and Hungary faced a wave of protests. The reasons are all the same: high energy prices and the high cost of living. Further deterioration in the situation will also affect the Euro. In favor of community currency can play the tone extremist -or difficult- from European Central Bank (ECB).
*** Igor Kuchma Analyst at Trading View.
Follow the topics that interest you
“Creator. Devoted pop culture specialist. Certified web fanatic. Unapologetic coffee lover.”