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The UK has now entered a technical recession, according to the latest figures.
The pound underwent a couple of corrections last week as markets reacted to economic data. Sterling first fell on the news that inflation had undershot expectations before tumbling again as the UK officially entered a technical recession.
Over the course of last week, GBP/EUR lost around a quarter of a per cent and GBP/USD dropped by 0.3%. The euro ultimately finished unchanged against the US dollar after a much-needed fightback from the single currency.
The word recession is one of those gloomy terms that prompts sighs from all quarters. Sadly, the UK was subjected to a chorus of recession chatter as the impact of high interest rates finally pushed GDP below zero for the second consecutive quarter. There are signs, however, that this will not be a prolonged recession, not least a robust employment market, cooling inflation and a rebound in consumer spending numbers. While the mist of winter has yet to dissipate, summer feels like it isn’t too far around the corner.
Over in the USA – the land of seemingly endless economic summer — last week brought news of buoyant consumer sentiment in the preliminary release of the University of Michigan Consumer Sentiment survey. That same university’s college football team won the national title this year, so perhaps we shouldn’t read too much into its happiness for the time being.
Last week served as another reminder that currencies can be torpedoed by a number of factors. Economic data served as sterling’s banana skin last time out, but a cocktail of competing events can just as easily cause big fluctuations.
Here’s what to look out for this week…
Monday and Tuesday are distinctly quiet. There’s only a handful of Japanese reads to get excited about, assuming government debt auctions aren’t your thing (us neither).
Swati Dhingra is rapidly gaining a reputation as the Bank of England’s biggest dove. She will make a speech on Wednesday, but that’s just a starter ahead of the day’s main event: FOMC minutes from the Federal Reserve.
Thursday is a whole lot busier, with European manufacturing numbers, UK services data and US initial jobless claims to get through.
We’ll then see the German Ifo business climate survey on Friday along with German GDP for Q4.
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GBP: Retail therapy
What better way to cast off the blues of recent days than a little retail therapy? News that sales had climbed by 3.4% in January (far more than the 1.5% that was expected) brought the week to a close on a slightly happier note for the UK.
GBP/USD: the past year
EUR: Finding its floor
The euro has been steadily losing value to the pound and the US dollar since the beginning of 2024. Last week’s gains were only marginal, but the eurozone will take heart that its anchor has finally caught the seabed.
GBP/EUR: the past year
USD: PPI nudges up
The US Producer Price Index (PPI) climbed 0.3% in January, representing the largest increase in five months. For anyone familiar with the American healthcare system, it will be little surprise that the biggest increase was in the price of hospital care (2.2%).
USD/EUR: the past year
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