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What does NIESR’s latest report show and how is it affecting the sterling?

John Naronha


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While the sterling has lost 2% of its value to the US dollar in the year to date and more than 4% since March 2019 on fears of a no-deal Brexit, a report by the National Institute of Economic and Social Research (NIESR) paints a bleaker picture for the UK currency.

According to NIESR’s latest report on Monday, economic growth in the UK is likely to have slowed down, with a one in four possibility of the economy already being in a technical recession. If Britain exits the European Union without a deal, the outlook could be extremely gloomy with a strong chance of a severe downturn before the economy begins to rebound in 2021. If, on the other hand, a no-deal Brexit is avoided, the UK’s economic growth could advance by about 1% this year and in 2020 respectively, although uncertainty would lead investors to hold back investments.

The NIESR’s report pushed the pound sterling down by about 40 cents towards 1.2450 versus the greenback before profit-booking drove the currency back above 1.2480. However, the political risk in Britain and the extremely vulnerable external position is likely to affect the GBP in the near-term as another Brexit deadline approaches with zero clarity.

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