The pound sterling is close to showing the weakest week of the month, as the economic outlook for Great Britain worsens.
According to MUFG analysts, a report on British GDP published on Tuesday disappointed not only with weak growth in the main indicator but also with details.
"The recovery of the services sector, in particular, whose main driver is consumer demand, was extremely sluggish. The activity index in the service sector in May increased only by 0.9% in monthly terms, which was significantly lower than the forecast of + 4.8%, " MUFG analysts said.
As British GDP grew weaker than expected in May, investors doubt that the already announced fiscal stimulus measures would be enough to support the national economy.
Although data released on Thursday showed that the country's unemployment fell in June, but economists expect a potential increase.
The pound became the worst currency among colleagues this week, falling 0.6% against the US dollar.
"There is concern about the UK economy. There are also concerns that the Monetary Policy Committee (MPC) may ultimately weaken it even further, "strategists at Societe Generale said.
"Apparently, Britain is facing an extreme period of gloomy sentiment, as the national government plans to curtail its expensive job-saving program, and investors fear that the UK will only be able to close a bad trade deal with the European Union," MUFG experts said.
"The current picture indicates that the Bank of England will be forced to do more for the national economy than it promised at the moment, and the pound may be another regulator tool to stimulate economic growth," they added.
"The fact that the macroeconomic situation in the United Kingdom looks worse than in most other significant economies suggests that by the end of the current quarter the GBP / USD pair will return to the lower limit of the range in which it has been trading since April, around 1.21 ", - noted MUFG.
Nomura experts revised their forecast for the GBP / USD pair at the end of 2020 downward - from 1.2700 to 1.2400.
"It does not matter in what form the deal between Britain and the European Union will be concluded: in the form of a free trade agreement following the example of the EU-Canada or in the form of an association agreement that will resemble the EU-Ukraine agreement. In any case, for the United Kingdom it will be an economic blow, " Nomura experts.
"In addition, measures to support the British economy after the COVID-19 pandemic are significant, but they are much smaller than the stimulus package in Germany or other countries. At the same time, the duration of financial incentive programs or employment incentive programs is a problem for the UK, "analysts at Nomura believe.
