The Confederation of British Industry (CBI) has announced that Britain’s service sector has weakened as recession draws closer to the UK. The largest drop in activity came in the consumer services sector with restaurants, bars and hotels all seeing a sharp drop in business this could be largely attributed to the fact that as the economic situation in the country worsens people start to reduce their spending on “luxury” services and goods. This announcement from the CBI is bad news for Sterling exchange rates as the service sector makes up two thirds of the overall UK economy. Should we continue to see the service sector contract then the chance of recession will increase and Sterling could weaken as a result.

We heard yesterday that Germany have agreed to the latest Greek bailout of €130 billion which meas that it is really a formality that Greece will get the much needed money. This news came out on the same day that credit ratings agency Standard and Poor’s (S&P) classified the Greek debt as “selective default” placing more pressure on the debt laden country. Fitch, another credit rating agency, made a similar move last week and means that despite the funds becoming available to Greece soon it is unlikely that this means instant resolution to the debt crisis and therefore we can expect to see this story remain in the headlines for some time to come.

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