Daily digest market movers: Pound Sterling faces pressure, US Dollar remains sideways
- The Pound Sterling faces some pressure after the ONS has reported that the United Kingdom economy expanded 0.2% in January, in line with market expectations. In December, the economy contracted by 0.1%.
- The monthly Manufacturing Production remained stagnant in January, as expected, down from the 0.8% growth seen in December. On an annual basis, the economic data grew by 2.0%, also in line with expectations, but slowing from than the prior reading of 2.3%.
- Monthly Industrial Production was surprisingly down by 0.2%, while investors projected a stagnant performance. The economic data rose by 0.6% in December. The annual factory data rose at a slower pace of 0.5% against expectations of 0.7% and the former reading of 0.6%.
- The monthly GDP growth indicates that the economic outlook is improving, which could be a tailwind for the Pound Sterling. However, factory activity continues to face pressure.
- Meanwhile, market expectations for the Bank of England reducing interest rates in August have slightly increased due to easing inflation expectations and labor market conditions cooled down in the three months ending January. US bank Citi reported that consumer inflation expectations for 12 months' time fell to 3.6% in February from 3.9% in January.
- The UK’s Unemployment Rate surprisingly climbed to 3.9%, employment levels declined, and Average Earnings excluding bonuses grew at their slowest pace since October 2022. However, wage growth is still roughly double than what required to be consistent for bringing down inflation to the 2% target.
- Meanwhile, the market sentiment remains cautious as stubborn United States Consumer Price Index (CPI) data for February have uplifted expectations for the Federal Reserve keeping interest rates steady in the first half of 2024. The hot US inflation data indicated that the Fed will continue with its hawkish narrative.
- The US Dollar Index (DXY), which measures the Greenback’s value against six rival currencies, consolidates in a tight range slightly below 103.00.
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