Sterling slides as UK economy contracts

Sterling lost further ground on Friday and for a time this morning was trading at 93p to the euro and is down to $1.20 against the dollar. Weak UK data – the economy contracted in Q2 – and the continuing uncertainty and concerns about Brexit is putting pressure on sterling

The UK economy shrunk by 0.2% Q-on-Q in Q2 of this year, the first quarterly fall since Q4 2012. The services sector was the only positive contributor to growth but it too slowed to increase just 0.1% Q-on-Q. Industry contracted sharply in Q2, while exports and stocks -which boosted growth in Q1- were a drag on growth in Q2

Equities lost ground last week while bond yields fell as trade tensions rose with President Trump calling China  a currency manipulator while there are increasing worries about growth prospects across the global economy. Closer to home in Europe, political turmoil in Italy is roiling markets where Italian bond yields are rising as yields elsewhere remain at low levels

Expect no respite from news in the week ahead as the political fallout in Italy is set to continue and on the data front we get Euro area Q2 GDP, retail sales and inflation in the UK and US and UK labour market data also