In the last few months, the economic data coming out of Britain has shown a deterioration of the economy. In Q1 we saw some surprising figures, but that was due to stockpiling from British firms. The small rebound of the global economy in Q1 also helped the UK economy. But, Q2 has been really terrible for the UK economy as the data has shown.

The services sector posted a 50.2 print earlier this month, showing that it is very close to stagnation, the industrial and manufacturing sectors are already in contraction, while construction is deep in contraction. That gives you an idea of the broader economy, which is close to recession, if not there already. This has been my opinion for some time and now the UK think tank firm NIESR thinks the same as well.

They released a report saying that there is a 25% probability that Britain might already be in recession. NIESR sees odds of a no-deal Brexit at 40% and a possibility of a severe downturn in the case of a disorderly, no-deal Brexit. But current forecast assumes a no-deal Brexit is avoided.

They see 2019 GDP growth at 1.2% and 2020 GDP growth at 1.1% under that assumption. So, tough times ahead for the UK and the GBP as NIESR forecasts and GBP/USD has fallen below 1.25 again now. The GBP should remain bearish for quite some time, so pullbacks higher such as during last week should be seen as great opportunities to sell.