The UK economy technically in a recession and the Brexit bells are ringing, COVID-19 complicates the scene.

After the United Kingdom quarterly GDP showed a contraction of 20.4%, for the second consecutive quarterly contraction, the UK economy is technically in recession, while the government races to reach a trade agreement with European partners before the end of this year. In the same time, what increases the scene Complicated is the rapid return of the spread of the Covid-19, which may prompt the government to take measures that help stop this spread, which will negatively affect the fragile economy.

Source: office for national statistics UK.

The quarterly GDP reading shows the contribution of private consumption to more than 70% of the GDP contraction, as private consumption decreased by 23.1%; It also recorded a significant decrease in the gross fixed capital formation by about 25.5% and government consumption by 14.0%. Meanwhile, the imports recorded a decline greater than the decline recorded by exports, that's lead to trade balance positive contribution to GDP.

In any case, the markets are waiting with great anticipation for any positive data that reflects the improvement in the economic situation in the United Kingdom, and on the level of negotiations with the European Union, any signs of reaching a trade agreement are a very important and sensitive issue, and on the other hand, controlling the spread of the virus is the cornerstone at the beginning of any successful efforts to stimulate the economy on the part of the government, and accordingly, we see the continuation of the pound sterling under pressure from the three sides, whether in terms of general economic performance, or terms of the Brexit file and finally on the side of Covid-19, which turned the world upside down.

Written by Ramy Abouzaid, ATFX (CY) Dubai Rep Office Head of Market Research.

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