Currency watch: No green shoots in sight

Now the riots have subsided and the endless streams of debate have begun, this week saw a much more qualified brand of pessimism come to the fore.

In between David Starkey’s depressingly out-of-date appraisal of the problems in our society, and David Cameron’s generally hysterical reaction to the riots, the Bank of England’s monthly meeting details revealed some acutely negative economic views to pour whisky on the fire.

The minutes from the August meeting revealed that the committee voted unanimously 9-0 to keep interest rates on hold – a shift in pattern from the 7-2 seen over the last few months and the first time that there has been total agreement on the matter since May 2010.

When considering quantitative easing (QE) it was once again only Adam Posen who voted in favour of increasing the asset purchase program, although some members of the committee did question whether there was a need for further stimulus.

The statement hinted that if we see indicators pointing towards weaker economic performance, it looks increasingly likely we will see another injection of QE at some stage in the near future.

Following this, the UK’s latest unemployment figures also provided some sober reading.

The headline figure saw unemployment rise to 7.9% (from 7.7%). A closer look at the figures reveals that those claiming unemployment benefits also increased between May to July, which does not bode well for Q3 of this year either.

UK retail sales did at least see some growth in July, but a weak increase of just 0.2% was hardly anything to break out the bubbly for.

The picture is a cyclical one; people are spending less because of concerns about job losses, wages and, of course, increasing inflation.

All of this bad news has led several commentators to suggest that the possibility of a double dip recession sometime in the next year is a very real threat.

The consensus view is that the Bank is more worried about a recession now than it was when we were about to enter one last time around.

The UK badly needs some good news. If the Europeans, specifically the French and Germans, can create at least some sense of moving forward with a legitimate plan for Eurozone recovery, that would certainly help.

News that even the German economy had ground to a virtual halt is not what was required. UK exporters will be hit hard if the German recovery stalls for a prolonged period of time, and this is a development that we could really do with avoiding.

Jeremy Cook is chief economist at World First foreign exchange