GU - FUNDAMENTAL ANALYSIS

12 Jul 2022

As Britain's election campaign kicks off, the British pound fell below $1.2, close to a four-year low. This is partly due to concerns about the UK's economic outlook. As a result of Johnson's resignation as prime minister, ten Tory MPs have announced their intent to become the next premier, including former chancellor of Exchequer Rishi Sunak. A recession risk has loomed since May of 2021, and investors doubt the BoE will be able to control soaring inflation without harming the economy. There is no sign of inflation peaking and households are likely to be stretched further in the coming months, with some rate hike bets being scaled back by the markets. The central bank has already raised interest rates by 115 points, but inflation does not appear to be troughing, and households are likely to be more stretched going forward. On the other hand, investors await monthly GDP figures from the ONS, which should confirm that the economy slowed in May.