GBP: Recession weakens deficit financing – Nomura

Research Team at Nomura, expects the UK economy to enter a recession after the Brexit vote.

Key Quotes

“Recession could improve elevated current account deficits via a decline in imports, while exports remain supported. However, a recession would weaken foreign investment flows more significantly, as historical experience suggests. In fact, we have already observed signs of weakness in foreign investment flows into the UK this year.

GBP/USD declines on average by around 3% per month during a recessionary period, and about the 15% depreciation so far this year may not be extraordinary yet if recession continues for six months or longer.”