IMF Gives UK Economy Stamp of Approval : British Pound Sterling GBP Forecast Improves

December 14, 2015 - Written by Tim Boyer

STORY LINK IMF Gives UK Economy Stamp of Approval : British Pound Sterling GBP Forecast Improves

IMF Positive about British Economy but Warned against Brexit in 2017

The Pound Sterling (currency : GBP) received a marked boost during the final stretch of last week’s session.

The International Monetary Fund (IMF) has not been universally positive about the decisions taken by UK policymakers since the global financial crisis of 2007 – 09, at one point criticising the British coalition’s austerity policies and suggesting that they should adopt a more growth-based approach. However, the organisation’s Managing Director Christine Lagarde issued a highly encouraging assessment of the current state of UK PLC last week.

The IMF Chief observed that, ‘life is about risk, but what we are seeing is a very strong performance from the British economy.’

However, Lagarde’s message was not universally go-ahead; she alluded to the current heightened levels of household and governmental debt in the domestic economy and noted the massive trade deficit which persists in the UK.

She went on to warn that these perceived weaknesses could be severely accentuated if the British people vote to leave the European Union, stating that a Brexit would mean that, ‘trade would be harder, tariffs would be higher… the financial fluidity within the European Union would not be as good as it is at the moment.’

Federal Reserve Interest Rate Decision Dominating Trader Focus this Week

Meanwhile, ‘risk’ is the word at the forefront of the minds of many investors this week given the potential for a headline-grabbing event on Wednesday evening.

If, as expected, the US Federal Reserve breaks rank and becomes the first major global central to increase its headline interest rate in recent years, then it would appear highly likely that last week’s flight to safety and out of equities by investors will take hold. In such an event, then look for the risk-driven South African Rand (currency : ZAR) to incur fresh losses following last week’s sharp downward movement.

However, many analysts feel that the first hike in a fresh tightening cycle from the Fed could mark a turning point. They remind investors that US stock markets have recorded gains of between 10 – 20% during the twelve months which immediately followed the initial rate hike in previous cycles.

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TAGS: Pound Sterling Forecasts South African Rand Forecasts