Author Archives: Ricky Kielkowski

A combination of better-than-expected statistics and hawkish central bank news flow contributed to the firming yesterday. The flash composite PMIs for February were higher than expected in the Eurozone and the UK, however the former remained below the critical 50 mark.

Meanwhile, the US composite PMI was in expansion mode, and the most recent initial jobless claims statistics were lower than expected.

On the monetary policy front, the ECB meeting minutes stated that the danger of cutting policy rates too soon was still believed to outweigh the risk of cutting too late, suggesting that an early reversal of last year’s rate hikes was extremely unlikely.

Currency-wise, the euro was in the ascendant early yesterday. However, the single currency was unable to maintain its gains, with sterling unaffected by the data.

 The rest of today’s data schedule is very thin on both sides of the Atlantic. Meanwhile, senior ECB officials, including President Lagarde, will speak.

Currency-wise, the dollar was under some downward pressure. The dollar fell 0.3-0.4 percent against the euro, pound, and yen. The weaker dollar tone was related to a slight drop in US rate forecasts.

Meanwhile, UK market rate expectations fell slightly after BoE Governor Bailey’s dovish remarks to the Treasury Select Committee. Governor Bailey remarked that the BoE does not require inflation to return to goal before lowering interest rates.

Today’s flash measurement of Eurozone consumer confidence for February is due. The indicator is expected to increase somewhat, but it is unlikely to affect the euro.

The minutes of the US Federal Reserve’s late January policy meeting will be revealed this evening. The outcome of that meeting disappointed consumers because it did not provide a clear signal on the timing of the first interest rate drop.

In addition, since then, different economic statistics have led markets to delay the beginning of the reduction cycle until at least the middle of the year.

Following an impressive start to the year for the UK in terms of economic data, todays Growth figures have revealed the UK has fallen into a recession.

This morning, a flurry of UK economic data has been released. UK GDP came in negative and showed that growth in the UK fell by 0.3 percent in the fourth quarter of 2023.

It means that the UK has now entered a recession, as there has now been two consecutive quarters of negative growth. This will be the first time there has been a recession in the UK since the first half of 2020, when the Covid-19 lockdown occurred.

 This was expected; however, today’s figures were worse than the -0.1 reading markets had pencilled in. This explains why the pound has taken a tumble this morning, following the latest data.

2023 was tough for the UK following the cost-of-living crisis. The side effects of higher interest rates deployed to tackle that have also hit spending, incomes, and profits.

The UK is not alone, the EU narrowly avoided recession in the second half of the year.

Markets will now shift their attention to the Bank of England in anticipation of when they will look to cut interest rates.

 GBPEUR dropped to a weekly low after achieving an 18-month high since August 2022 earlier this week. GBPUSD is close to its lowest level since mid-December.

 Later this afternoon, investors will shift their attention to US Retail Sales. Markets expect this to fall to -0.1 percent in January, down from 0.7 percent in December. US industrial output is anticipated to rise by 0.3 percent.