- Strong unemployment data and retail figures
- UK could get special status post-Brexit
- Cheaper Sterling helping the economy short term
- UK to avoid recession according to Moody’s
Pound Sterling provided with fighting chance in post-Brexit Britain
The UK’s decision to leave the EU was met with widespread criticism from a majority of the nations media outlets. The rest of its European neighbours watched in great surprise and shock which resulted in Sterling losing 10% of its value in the space of seconds.
The general consensus has been that the UK, its economy and more specifically, Sterling, would be on a long road to ruin. Moody’s forecasted that the UK could hit a recession at the beginning of 2017, the Bank of England panicked itself into an interest rate cut off the back of poor preliminary data.
The European commission have made clear their intentions of making post-Brexit negotiations difficult, and whilst things were looking rather gloomy, the UK are still no closer to formally withdrawing its membership from the EU.
But now it looks as though the tables have turned, not only are the signs pointing the other way, the UK may be getting special treatment after all.
Strong economic data surprises markets
Unemployment was down for the month of July, claimant counts were also down, whilst some have pointed out that these figures are unlikely to spill into economic data for some time, retail sales took an alarming upbeat tone this morning.
With the fall in Sterling, businesses have had to pass incremental costs onto their consumers, which has in the short term aided in fighting inflation. Consumer price supported this which also showed moderate gains compared to predictions.
Cheaper Pound Sterling helping the economy
A cheaper Pound is having a positive impact on the British economy, not only are exports more attractive, foreign investment remains at an all time high. The Chinese continue to invest in British properties with little signs of Brexit presenting concerns for businesses and consumers alike. British farmers will also benefit from the weaker Pound this summer, the European Union’s Common Agricultural Policy (CAP) which pays British farmers is provided in Euros, giving them a welcomed bonus whilst Sterling remains weaker against its counterpart.
There does not appear to be any signs of economic contraction since Brexit, whilst it may be too early to conclude, the early signs seem to point towards economic stability and growth, which were echoed by Moody’s in its latest growth estimates.
UK could get special treatment from EU
Germany’s European affairs minister made comments to Reuters that the UK could get special treatment when it comes to negotiations. Michael Roth made the comments whilst echoing Angela Merkel’s stance regarding the UK’s ability to cherry pick. It’s becoming more apparent that the EU will need to consider how it deals with the UK post-Brexit, given German’s huge car exports.
The UK is not a small island as some believe it to be, the UK is a strong, well established political and economical power with a long history of ties with not only individual European states, but the US and Asia. Not to mention it is the financial hub of the world. The UK imports a large number of its goods from Europe, if the EU can not secure a deal for the UK trade tariffs could be imposed on imports, a move that would not benefit the single market.
With the above in mind, I see a much more optimistic forecast for Sterling, if the data continues to support post-Brexit stability Sterling could find further support.