A dovish outcome from the European Central Bank (ECB) meeting last week, marked by reduced inflation forecasts, has driven the DAX to its fifth consecutive week of gains. This week, the focus shifts to the UK, with the release of January’s Gross Domestic Product (GDP) figures set before the next UK inflation report.
These figures will set the stage for the Bank of England’s interest rate meeting on 21 March. Readings lower than expected could lead the market to anticipate earlier Bank of England rate cuts, especially after the UK economy recently entered a recession.
UK GDP expectations for January
Date: Wednesday, 13 March at 6pm AEDT
Last month’s National Accounts indicated the UK economy contracted by 0.3% in Q4 2023, marking the nation’s entry into recession since the Covid-19 pandemic, following a 0.1% contraction in Q3 2023.
Despite the challenges of strikes and inclement weather, the upcoming release of January’s monthly GDP data is expected to show a slight increase of 0.1%, buoyed by better-than-expected Purchasing Managers’ Index (PMI) figures.
A number lower than expected could increase the likelihood of the Bank of England (BoE) accelerating the pace of interest rate cuts this year. Currently, the rates market anticipates the first BoE rate cut in August, with a total of 72 basis points of cuts expected for 2024.
