Bad pound! Foreign exchange transaction mt4 MT5 market trend analysis

Barclays said the UK economy will avoid recession, but economists at belenberg bank said the UK may have fallen into recession and will continue for four quarters.

Barclays admitted that the UK economy is slowing, but this slowdown is not enough to lead to two consecutive quarters of contraction.

Abbas Khan, an economist at Barclays in London, said: "although the economy is bound to slow down further, tight labor market conditions, excess savings and highly targeted financial support should prevent a sharp decline in GDP and a complete economic recession."

His assessment follows a stronger than expected PMI preview survey in June. The UK's comprehensive PMI was 53.1, unchanged from May, better than the consensus expectation of 51.8. The UK PMI is in positive contrast to similar data in the euro zone, which has deteriorated more than expected. The bank noted that this difference helped the pound rise against the euro.

However, the sub indicator readings of the PMI survey on UK corporate expectations and new order inflows were particularly weak, indicating that the situation may deteriorate further in the coming months.

New orders in the UK service sector fell by 3.2 points and manufacturing by 1.5 points, both of which were significantly lower than the long-term average. Business expectations in both industries have fallen sharply, and the current level has been consistent with the upcoming recession in the past.

"This shows that the slowdown in economic activity may become more serious as the backlog of support subsides in the coming months," Khan said He added, however, "employment is still a bright spot. Employment has hardly changed and is still far higher than the historical average.".

Obviously, the willingness to recruit is still strong. " Barclays believes that the UK labor market situation should continue to be constructive from the current very tight level.

In addition, the PMI survey shows that the price pressure experienced by enterprises has not increased, and there are signs of peaking. This is in line with the inflation data released on Wednesday. Data released on Wednesday showed that core inflation in the UK unexpectedly cooled.

The strong labor market in the UK, the fiscal stimulus measures recently announced by the chancellor of the exchequer, Rishi sunak, and the excess savings accumulated during the epidemic are all seen as providing a buffer for the economy.

"At the same time, price pressures do not seem to have intensified, and may have peaked, which may indicate the advantage of the MPC starting the interest rate hike cycle earlier than the central banks of other developed countries," he said Therefore, they still stand in the institutional camp and believe that although the economy is slowing, recession will be avoided.

Barclays believes that from today's data, there is no strong evidence that the Bank of England will raise interest rates by 50 basis points at its meeting in August, although the inflation data in June (July 20) will be the key.

At the same time, economists at belenberg bank said their new basic forecast was that there would be recessions in Britain, the euro zone and the United States.

Salemon Fiedler, an economist at behrenberg, said in a report released after the PMI data release: "although the current output remains quite good, because enterprises are trying to solve the problem of manpower shortage and employment continues to grow, the outlook is becoming more bleak.

”He added: "the survey pointed out that the new order volume index fell sharply, and business expectations fell to the lowest level since May 2020."

Berenberg bank said that the UK economy seemed to be in recession, with deteriorating supply shocks, soaring inflation and tighter monetary policy overwhelming most good fundamentals.

It is predicted that the British economic recession will last for four quarters. From the second quarter of 2022 to the first quarter of 2023, Berenberg bank predicts that the real GDP from peak to trough will reach about 2.2%.