Take a pinch of negative retail sales, a dash of high unemployment and add to a £15.9 billion public sector net borrowing requirement. Be sure to squeeze household spending then rub in high inflation, low wage growth, public sector job cuts and crippling austerity measures. Combine the two mixtures, bring to the boil for a few months and serve on a platter of Eurozone debt contagion and a slowdown in global growth. If that isn’t a successful recipe for a recession I don’t know what is.

The IMF told us little that we don’t already know when they lowered their growth forecasts for the UK last week and there are certainly more tough times on the horizon. So, surely we can expect swift and decisive action from central banks and governments alike in an effort to baton down the hatches in the eye of the storm? Well, not necessarily.

The Bank of England minutes revealed that only one MPC member, Adam Posen, voted for further QE at the September meeting. All of the MPC elected to keep interest rates unchanged but when it came to the crucial question the minutes say “for some members, continuation of the condition seen over the past month would probably be sufficient to justify an expansion of the asset purchase program at a subsequent meeting”. Translation – we need to see a poor Q3 growth estimate, the final nail in the coffin, before we will agree to act. Most market participants believe more QE will come through in November although some believe we will get an extra £50 billion as soon as October.

It is difficult to gauge the potential effect of the program given the current state of the global economy. The good news is that it will definitely have a positive impact which is a boost the UK economy is long overdue.

Key releases for Sterling this week

Please note that movements on currency markets will be dominated this week by the unfolding sovereign debt crisis in Europe. If you would like to take advantage of our free rate watch service please contact your dedicated dealer.

Mortgage approvals are out on Thursday at 9.30am – we are expecting a fairly flat to mildly positive reading which will be bullish for Sterling.

Gfk consumer confidence out on Thursday at midnight – we are expecting a poor reading which will be bearish for Sterling.