Carney Warns Of Recession Should UK Vote “Out”

Thursday, 12th May: Being accused of using funding from state banks to conceal just how bad your budget deficit is, ahead of your upcoming election,  isn’t going to end well, is it Dilma Rousseff? The Brazilian President has been suspended, accused of doing just that. The country’s Senate has voted to put Rousseff on trial for breaking budget laws. Vice President Michel Temer will now step up to take over from Rousseff, in a country that has been plagued with political and economic volatility. Rousseff was the country’s first woman president, but it seems her political career is over definitively.

In the UK the Bank of England (BoE) have unanimously decided to keep interest rates on hold. In the Bank’s Monetary Policy Committee (MPC) minutes revealed the starkest warning yet that an “out” vote in the upcoming referendum could hurt the economy, with risks including “a technical recession”. The minutes also said that a leave vote could cause both growth and sterling to fall, whilst unemployment could rise. The uncertainty arising from the upcoming vote has already been weighing on the UK economy, and the central bank has since trimmed growth forecasts for this year. Previous February estimates for growth had been 2.2% but this has now reduced to 2.0%, regardless of the June 23rd vote result. Following the BoE announcement sterling jumped to $1.453, its highest since 6th May. Sterling has been gathering strength again since weakening following the referendum announcement, and is currently nearly 2% lower vs the US dollar year-to-date.

Elsewhere in the UK the number of people buying a new house fell to its lowest level in nearly 8 years in April, according to the Royal Institution of Chartered Surveyors. The new stamp duty rise has been blamed partially, alongside, you guessed it, the upcoming EU referendum (6 weeks left, stick with it).

At the end of Thursday’s trading European equities ended in the red, with the DAX in Germany the biggest loser ending the day -1.13%. The CAC ended -0.54 whilst the FTSE 100 ended -0.95%. The Dow Jones and the S&P 500 are both trading negatively. At the time of writing GBP/USD is +0.14% at $1.4455.