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28 March 2024 | FXGT.com

UK Data Confirms Economy Entered Recession Last Year

  • UK Economic Recession Confirmation: The Office for National Statistics reported a contraction of 0.1% in the UK’s GDP in the third quarter and a 0.3% shrinkage in the fourth quarter. These figures align with preliminary estimates and have not significantly impacted the pound or monetary policy expectations.
  • UK Inflation Data Raises BoE Rate Cut Expectations: The recent release of softer inflation figures for February in the UK has heightened market anticipation for Bank of England (BoE) rate cuts potentially starting in June.
  • BoE Monetary Policy Expectations: Futures markets indicate a roughly 20% chance of a rate cut by the BoE in its May meeting, with a 55% probability for a cut by the June meeting, as traders adjust their expectations based on the central bank’s signals and the broader economic outlook.
  • Fed Governor Waller’s Remarks: Christopher Waller emphasized a cautious approach to rate cuts, highlighting the importance of further evidence on inflation improvement before policy easing begins, advocating for a patient stance.
  • Fed Rate Cuts Expectations: The CME Fed Watch Tool now indicates a 63.5% probability of a rate cut at the June Federal Open Market Committee meeting, reflecting Waller’s comments and recent data trends.
  • Pound Sterling Faces Pressure Ahead of US PCE Data: The GBP/USD pair has dipped to $1.2600 as markets await the US core Personal Consumption Expenditure (PCE) inflation data for February. The upcoming data is crucial as it might provide insights into the Federal Reserve’s timeline for initiating rate cuts.

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