Brexit tensions rise as sterling sentiment remains poor
Sterling sentiment remained poor as on-going fears for the economic outlook and important concerns surrounding the outlook for consumer spending given that energy prices have rocketed. There were also further expectations that interest rates may not rise much further this year. Brexit tensions rose again on fresh reports that the Government was preparing legislation to breach treaty obligations under the Northern Irish protocol.
The Eurozone economic sentiment posted a stronger recovery than expected as overall Eurozone vulnerability to the Ukraine crisis is perceived as slightly lower. Bundesbank (German) President Nagel stated that the Euro inflation trend is disturbing and gaining momentum before adding that the ECB should raise rates in July.
Although risk appetite attempted to recover it fell again towards the end of the day. The Pound failed to sustain a recovery against the Dollar, dropping below 1.2300 before finding some support. The Euro remained around 1.1695.
The NIESR predicted a technical recession in the second half of 2022 in the UK, also calling for additional support for the poorest households.
Sterling edged higher on Wednesday amid a slightly less defensive tone surrounding risk appetite, but overall confidence remained vulnerable.