Morning Forex Fundamental: GBP

Morning Forex Fundamental: GBP

'We face the rather unappealing combination of a subdued recovery with inflation remaining above target for a while' - Bank Governor Mervyn King

U.K. economy likely to shrink in Q4

Impact Medium

Britain's economy is facing risks of further instability and slowdown and is likely to slip into its first triple-dip recession in the last quarter of this year. Nation's gross domestic product is expected to fall by 0.1% in the three months through December, and will expand only by 1% in 2013, while the inflation rate will be around a 2% level. Earlier this week, Bank of England Governor Mervyn King said the outlook for the economy remains challenging, and the recovery will take more time than initially was expected.

'With business surveys and an external environment still weak, there's a pretty high chance that GDP will fall back in the fourth quarter,' said Samuel Tombs, an economist at Capital Economics Ltd. in London. 'It's not our working assumption there will be a contraction in the first quarter, but if there was a proper triple dip, not caused by temporary factors, I think there'd be a high chance of more QE.'

'We face the rather unappealing combination of a subdued recovery with inflation remaining above target for a while,' Bank Governor Mervyn King said.

The FTSE 100 Index turned lower 1.27 per cent to 5,605.59. The broader FTSE All-Share Index fell 1.21 per cent to 2,932.72.