UK economy enters technical recession
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Daily Currency Update
The pound slipped closer to the $1.25 support level as investors closely analysed various economic indicators and their potential impact on the Bank of England's policy decisions. Preliminary data revealed a 0.3% decline in the UK economy in the last quarter of 2023, exceeding market forecasts of a 0.1% decline and marking the country's first technical recession since the aftermath of the 2020 COVID-19 pandemic.Earlier in the week, the CPI report offered some relief from inflation worries, with January's inflation rate coming in at 4%, slightly below the expected 4.2%. Bank of England Governor Andrew Bailey expressed optimism about the recent inflation numbers, which closely matched the central bank's projections, and he pointed out early signs of economic recovery.
Key Movers
The US dollar remained within a narrow range as traders sought clarity on when the Federal Reserve might initiate interest rate reductions, while Fed officials assessed Tuesday's inflation figures.The latest U.S. inflation data caused expectations for the first Fed rate cut to shift to mid-year, with the consumer price index indicating a 3.1% increase in January year-on-year, surpassing the anticipated 2.9% rise.
Currently, the market could indicate a reluctance for a rate cut in March, with a greater likelihood that the rates will remain the same through to Mays Fed meeting.
Expected Ranges
- GBP/USD: 1.2485 - 1.2575 ▼
- GBP/EUR: 1.1655 - 1.1715 ▼
- EUR/USD: 1.0685 - 1.0755 ▼