The Death of Queen Elizabeth II & The Impact on the UK Economy

UK’s relative rebound hits pause

The UK had been enjoying a slight uptick in economic fortunes of late. According to the Office for National Statistics, British gross domestic product expanded 0.2% after dropping 0.6% in June.

How the UK economy may be affected

Britain hasn’t mourned a monarch for 70 years, so this is an almost unprecedented event with very little signals as to how the economy will be affected. The impact will likely only be known well after the event. However, the following could happen, or already has…

#1 Monetary policy put on hold

The 10-day mourning period has caused many institutions to put their plans on hold, not least the Bank of England, whose Monetary Policy Committee was supposed to meet last Thursday. As a result, that inflation rate is going nowhere until the usual schedule resumes.

#2 Truss’ relief plan delayed

New UK PM Liz Truss announced a massive aid plan for British households just 2 days into her premiership. It’s expected that her plan will result in a two-year freeze on energy prices for individuals and a six-month freeze for businesses and public institutions. But nothing can happen until the House of Commons gets to vote on the plan, which is now off the agenda until after the Queen’s funeral.

#3 The day off might cost a bit

As we said before, the GDP rise came following the dip in June, which was a direct result of the extra Bank Holiday as production and construction sectors saw a decline in productivity.

#4 A rise in tourism and trade?

Generally speaking, major royal events can see a rise in UK tourism and trade. This is usually related to happier occasions, however, for example, royal weddings. This remains to be seen this time, but it’s true that the Royal family does bring a huge amount of revenue to UK tourism.

#5 The FTSE strengthens

The FTSE 100, the UK’s benchmark index, closed 1.4% higher on the day of the Queen’s death, with mining companies leading the way thanks to a softening dollar.

What’s your take on the UK economy?

If you’re a GBP or FTSE trader, how have you adapted your strategy in light of this sad news? What are your predictions for the UK economy? Let us know by tweeting us at @_contentworks.

What’s on the trading agenda this week?

A relatively quiet week lies ahead for the currency markets. Here are all of the top events to take note of.

Monday

UK stock market closed. No major events are planned.

Tuesday

● JPY — Inflation Rate YoY (AUG)

Wednesday

● USD — FOMC Economic Projections; Fed Interest Rate Decision; Fed Press Conference

Thursday

● JPY — BoJ Interest Rate Decision

Friday

No major events are planned.

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