Brexit blows the second bullet

Posted Monday, August 1, 2016 by
Skerdian Meta • 1 min read

At first, the majority of the Brits and the rest of the EU didn´t think the British would vote pro Brexit. Then, when the Brexit side won, many thought that Brexit would somehow be avoided or be very very slow and soft. Whatever the scenario, the UK economy is getting the hits and starting to show it, a little too early in my opinion, which shows how nasty it can get if the situation precipitates.  

On Friday the third week of July, the first data gathered after the referendum, which was requested by the clients of the surveying firm Markit, showed that the manufacturing and service sectors plunged into negative territory in such a short period of time. That contraction in the manufacturing sector was followed today by a deeper contraction as more data is gathered since July 22. The expected number was 49.1 (below 50 means contraction) which is the same as the last reading in July, but it came out at 48.2%. 

GBP/USD is feeling the heat

Manufacturing is not the most important sector in the UK, but what´s most worrying is the contraction in the service sector, that we saw in July. If the contraction gets bigger as was the case with the manufacturing sector then the UK economy will be in serious trouble because this is the largest sector by far in the UK, think City in London. The worrying thing is that contraction has happened so fast. Anyway, we will post another more detailed update about the implications of Brexit and the impact on the GBP after we post some more support/resistance levels. 

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