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The British economy expanded 0.2% in January
The euro made marginal gains against the US dollar and pound yesterday following reports of softer labour conditions in the UK compared to market expectations.
Yesterday’s UK GDP announcement of 0.2% growth in January improved market sentiment as figures raised hopes that the country is on its way out of a recession. In response, the FTSE 100 soared to a 10-month high, however, the stock market remains cautious ahead of US retail data.
The Royal Institute of Chartered Surveyors reports UK estate agents are at their most optimistic about short-term growth in house prices in almost two years. This was reported in its 12-month house price expectations score which measures the gap between the percentage of respondents seeing rises and falls in house prices. It rose to -10 in February, beating expectations of -11 and above January’s reading of -18.
Yesterday, chancellor Jeremy Hunt admitted his plan to scrap employee national insurance could take more than 10 years to implement as it would require a sharp increase in economic growth to avoid making public service cuts. Speaking to MPs on the Commons Treasury committee, Hunt said, “It won’t happen in one parliament, but it’s a long-term ambition.”
Metro Bank announced on Wednesday that it had expanded an original £30 million cost-savings plan, first announced in October, and would be cutting 1,000 jobs. The lender also said it plans to end its trademark seven-day branch model.
Eurozone industrial production dropped 3.2% month-over-month in January 2024, far from market expectations of a 1.5% decline. It seems this was largely driven by a 12.1% loss for capital goods in the euro area. This was also felt in the EU, where capital goods declined 10.1%.
As for data, today is quiet for the UK, with US releases taking centre stage. Around midday, investors will receive February’s US PPI figures and retail sales stats. Markets expect retail sales to have expanded by 0.8% last month, which will hopefully reverse the 0.8% monthly contraction we saw in January.
Spain is also due to release its consumer price inflation data.
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GBP: On the road to recovery
Following yesterday’s GDP figures which showed 0.2% expansion in January, analysts report beliefs the UK is on the road to recovery. The figures were driven by a 3.4% rise in retail sales and a 1.1% rebound in construction output. Economists predict the UK will exit the technical recession in Q1.
GBP/USD: the past year
EUR: Monthly gains
Due to a lack of market-moving economic data, the euro is at the mercy of US data, which is due to come in from midday today. Compared to this time last month, EUR/USD is over 2% higher.
EUR/GBP: the past year
USD: Little traction
The US dollar struggled to make any traction yesterday against the pound and euro but bullish potential remains. Investors will be listening out for retail sales data, which might influence the Federal Reserve’s next move.
USD/EUR: the past year
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