Last week saw significant economic data releases, particularly regarding GDP and inflation rates in major economies like the USA, UK, Euro area, and Japan. These reports influenced currency market movements, with notable events such as the UK's fast-growing retail sales contrasting with its economic contraction, the Euro area's mixed performance, and unexpected changes in the USA's inflation and retail sales figures. Overall, these updates played a pivotal role in shaping investor sentiment and currency valuations throughout the week.
- The British pound stabilized around the $1.2566 mark, commencing from $1.262. Recent data showed a robust growth in UK retail sales for January, marking the fastest pace in nearly three years, surpassing expectations. On the other hand, preliminary figures indicated a 0.3% contraction in the UK economy during the final quarter of 2023, marking the UK's first technical recession since the aftermath of the 2020 COVID-19 outbreak.
- The UK's unemployment rate declined to 3.8% in the fourth quarter of 2023, down from 4.0% in the preceding three months, slightly below the market consensus of 4.0%. This marks the lowest rate since November 2022, attributed to a significant decrease in the number of unemployed individuals.
- In January 2024, the United Kingdom's inflation rate remained steady at 4.0%, close to November's two-year low and falling below market expectations of 4.2%. Contributing factors included a deceleration in price declines for housing, utilities, gas, electricity charges, and transport. Additionally, the Consumer Price Index in the United Kingdom witnessed a 0.60% decrease in January 2024 compared to the previous month.
- The British economy contracted by 0.3% quarter-on-quarter in Q4 2023, following a 0.1% decline in Q3, which was worse than market forecasts of a 0.1% fall, according to preliminary estimates. This contraction was based on a broad-based decline in output, notably in services, particularly wholesale and retail trade, industrial production, mainly in manufacturing machinery and equipment, and construction sectors.
- Retail sales volumes in the United Kingdom rebounded by 3.4% month-over-month in January 2024, following a sharp decline of 3.3% in December, surpassing market expectations of a 1.5% gain. This marked the largest monthly rise in trade since April 2021, with sales increasing across all sub-sectors except clothing stores.
- The euro maintained its position slightly above the $1.075 mark, rebounding from a recent dip to a three-month low of $1.0693 on February 14th, driven by cautious sentiments surrounding potential monetary policy easing from various European Central Bank officials.
- ECB President Christine Lagarde emphasised the need for further evidence, particularly concerning wage trends, before considering any cuts to interest rates, despite data suggesting inflation in the Euro area was gradually returning to target levels as anticipated.
- The Euro Area economy stagnated in the last quarter of 2023, following a 0.1% contraction in the previous three-month period, as persistently high inflation, record borrowing costs, and weak external demand continued to exert downward pressure on growth. Germany contracted by 0.3%, primarily due to weakness in the industrial sector, while France's GDP stalled. Conversely, economic growth in Spain and Italy accelerated to 0.6% and 0.2%, respectively.
- The dollar index subdued around 104.2 on Friday. Last week, the greenback surged nearly 1% to reach three-month highs before relinquishing most of those gains due to mixed US economic data. January data indicated that US consumer and producer prices increased more than expected, while retail sales declined faster than anticipated.
- US core consumer prices, excluding volatile items such as food and energy, rose by 0.4% from the previous month in January 2024, accelerating from the 0.3% increase in the previous period and exceeding market expectations of a 0.3% advance. This marked the sharpest increase in core consumer prices since April 2023, attributed mainly to an acceleration in the costs of shelter and transportation services.
- US consumer prices rose by 0.3% from the previous month in January 2024, the most significant increase in four months, up from 0.2% in December and surpassing market expectations of 0.2%. The rise was primarily driven by the continued increase in the index for shelter contributing over two-thirds of the monthly all-items increase.
- US retail sales contracted by 0.8% month-over-month in January 2024, reversing from a downwardly revised 0.4% rise in December, and worse than market forecasts of a 0.1% fall. This marked the most substantial decrease in retail sales since March 2023.
- Producer prices for final demand in the US increased by 0.3% month-over-month in January 2024, the most significant increase in five months, following a 0.1% decline in December and exceeding forecasts of 0.1%.
- Japan's GDP unexpectedly contracted by 0.1% quarter-on-quarter in Q4 of 2023, missing market forecasts of a 0.3% growth and following a revised 0.8% fall in Q3, according to flash data. The economy entered a recession for the first time in five years, attributed to a decline in private consumption, muted capital expenditures, and reduced public investment amid elevated cost pressures and lingering global headwinds.
- 21st February - FOMC Minutes
- 22nd February - Euro Area Inflation rate YoY Final
