The UK’s decision to leave the EU has raised some important questions, but as yet these questions don’t need to be considered. The first set of economic releases for the UK provided some insight as to how the UK will perform post-Brexit. It must be said however that whilst the data has been trending negative, retail sales amongst a few have provided some anomalies.
Is the data evidence of a post-Brexit recession?
Given that the UK will not leave the EU until at least 2019, there is an argument still that the recent run of economic gloom is in reaction to the vote, but like any major calamity a period of calm tends to follow.
The reality is, basing any conclusions on one set of data tends to lead to misjudgment, and judging the UK’s fate based on July’s preliminary data is no exception to the rule. The UK is still a member of the EU and once this message becomes clearer, least in the short to mid-term, there is an argument for supporting Pound Strength.
Whilst it is unlikely we will see a full turn-around on rates anytime soon, tomorrow’s consumer price release could raise some eyebrows.
Pound Sterling to recover?
It is simply to early to tell but there are many reasons to believe so, not least the fact nothing has changed since the historic vote. If tomorrow’s data bares negative, it still doesn’t give us a clear picture as to how the UK is performing. Consecutive releases in August, September and October will however. As it becomes more understood that the UK is still operating as a member of the EU for now, I am expecting the dust to settle significantly.
If you have currency to buy with Sterling, I am expecting further losses in the very immediate term before picking up again in September/October. Making a transfer before tomorrow’s next round of releases make be worth considering.