The GBP/JPY currency pair is trading above 162.00 in the early part of the US session, after falling for the last five days. Even though the UK has a summer holiday and there isn’t much on the macroeconomic calendar, the financial markets are still very unstable.

The Resolution Foundation, a UK think tank, told Reuters on Thursday that Britain’s next prime minister must come up with radical ideas like discounted power tariffs, energy bill freezes, or a “solidarity” tax hike for higher earners to ease the energy price shock for many households.

While Liz Truss, the UK’s Foreign Minister and the leading candidate for the Conservative Party’s leadership, is likely to call China an “acute threat,” according to sources quoted by The Times.

Also, analysts at Goldman Sachs agree with the Bank of England (BOE) that the UK will be in a recession in the fourth quarter of this year as they cut their “estimate for GDP growth in 2022 from 3.7% to 3.5%.”

The recession in the UK will not be too bad.

Conclusion:

We don’t think the British pound will drop much further from here, since growth expectations are already low and the pound is already seen as a bad investment.