The British economy contracted in January by 0.1%, as measured by Gross Domestic Product (GDP) out this morning. It will come as a blow to the chancellor Rachel Reeves, but the markets do not appear to think it will be enough to persuade the Bank of England to make a further interest rate cut next week, and sterling has recorded only very minor falls so far this morning.
Yesterday’s market-moving headline was a comment from President Trump that the US would impose 200% tariffs on European wine and champagne, after the EU put 50% tariffs on US whisky. This rather took the fizz out of the euro’s recent recovery and it declined by between a quarter and half a cent against major rivals such as USD, GBP and yen.
So, next week is a big one for central bankers, with both the US Federal Reserve and the Bank of England (BoE) making interest rate decisions, on Wednesday and Thursday respectively. No change from 4.5% is expected in the UK or the USA.
There was more poor data from the US labour market yesterday, with the US Challenger Layoff Data saying that actions by the Department of Government Efficiency (DOGE) were leading to a larger than expected number of layoffs. However, whether a reduction in the federal workforce is good news or bad will depend on your point of view.
The effects of tariffs on Wall Street continued to be felt yesterday, with the S&P 500 another 1.4% lower, and now 10% down since mid-February. Good news for gold holders though, as its value hit a new high.
The UK housing market is cooling, according to a survey of UK chartered surveyors. After being up in the +20s in December and January, the RICS House Price Balance fell to +11. This still means that the majority believe that process are rising, but fewer than before.
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