The Pound has continued its current slide against both the US Dollar and Euro, falling to fresh lows after it was confirmed earlier this morning that The UK fell into during the second half of 2023. GBP/EUR has now dipped below 1.17 just minutes after this release, with figures showing that the UK economy actually shrank by 0.3% quarter on quarter.
It should be noted that although a shrinking economy was expected, it shrank more than the anticipated -0.1% performance. Poor GDP performance, combined with inflation being lower than expected this will lead to growing pressure for The Bank of England to actually move forward with cutting their interest rates sooner rather than later.
Current market expectations for a first interest rate cut rose yesterday after the inflation release and again after this mornings GDP release markets are now pricing in a June interest rate cut above 75%, which is markedly up from 50% just a few days ago. This however should be taken lightly because this is purely market expectations and it could easily be that The Bank of England hold off until even later in the year.
Moving to this afternoon, we have the release of U.S Retail Sales for January which may be somewhat surprisingly expected to come in negatively at -0.1% from a positive 0.6%. This expected drop can be attributed to a drop in Auto Sales, a 2% drop in Gas prices and of course borrowing costs being at a near 20-year high for credit cards, car finance and personal loans. In terms of effects for The USD, I would imagine The USD could react slightly negatively to this but an outcome any better from this could actually allow for continued USD growth against GBP in particular.
