The Sterling traded in a relatively narrow range throughout yesterday and the overnight session as news from Westminster regarding Brexit quieted a touch compared to recent weeks. Headlines were made instead by a pair of reports about the potential impact the UK recession from the EU could have on the UK economy. The first publication was based on government analysis, which gave estimates on future growth resulting from a no-deal scenario, or Prime Minister Theresa May's exit plan. After 15 years the economy would be 3.9 percent smaller under May’s plan, however, exiting without a deal would result in a 9.3 percent loss the authors said.
Later in the day, we had the Bank of England’s forecasts made public which laid out a more grim picture of how no-deal would impact the UK economy. The forecast stated that a disorderly exit from the EU could lead to recession resulting in an 8 percent dip in GDP, with house prices dropping a third, and Sterling’s value falling by a quarter. Despite the gloomy prognosis, the GBP/USD held above its opening level of 1.2745 throughout the day, with traders likely remembering the Bank of England’s doom and gloom predictions of what would happen to the UK economy if it voted to leave the EU, which never materialized. GBP/USD rallied at the end of the day on the news from the US. The GBP/USD currently trades at 1.2779 after trading above 1.2800, and touching an intraday high of 1.2850 in yesterday’s session.