The UK narrowly avoided recession this morning despite the month of December showing a worse than expected 0.5% contraction. December’s number was partly due to strikes across a number of sectors. Chancellor Jeremy Hunt said the figures show ‘underlying resilience’, however we are not out of the woods yet.
The BOE expects the UK to still head into recession later this year, although it will be shorter and less severe than previously thought. The current 10.5% inflation number still remains a problem but is slowing, however it is still causing financial pain for families around the country.
Economic growth for Q4 was flat at 0.0% and figures for Q3 were revised up slightly from -0.3% to -0.2%. The IMF have constantly talked down UK economic growth recently and despite this the UK economy grew 4% in 2022, the best performer of the G7.
The pound gained some ground over the past few days briefly pushing to 1.22 against the dollar and holding close to 1.13 against the Euro.
The dollar however has gained some ground back overnight across the board as there are some analysts predicting that the recent strong employment data from the US will give the US FED the need to continue hiking rates to around 6%, which is 1% higher than previously thought. GBPUSD currently resides at 1.21, whilst EURUSD has dropped to 1.07.
The US Fed were only speaking a few weeks ago about cutting back on Interest rate hikes with potential reductions in late 2023, however the recent data has really spun their views
Both the BOE and ECB will be speaking at 2pm today, so there could be some potential volatility, and at 3pm US Michigan Consumer Sentiment data is being released as the main data for the day.
GBPUSD resides at 1.2085
GBPEUR resides at 1.1296
EURUSD resides at 1.0695