Resilience

Equity markets are ending the week on a flat or slightly downbeat note which has largely reflected the mood all week, really.

Central bankers, particularly from the Fed, have been out in force stressing caution over interest rate expectations. And it’s clearly had an impact following that red-hot jobs report last Thursday. Markets are now pricing in two more hikes from the Fed and possibly one cut later in the year.

No time for sparkling wine

I think it’s safe to say the sparkling wine can remain on ice after data this morning confirmed the UK avoided a recession at the end of 2022 by the narrowest of margins. So much so that there’s every chance that a tiny revision over the next couple of months confirms quite the opposite.

Ultimately, this isn’t a story of whether the UK is in recession or not as that’s just a simple technical definition. It’s a story of zero growth – quite literally in the case of the fourth quarter – and the fact that this likely represents the recent past, present, and near-term future prospects for the UK economy. High but falling inflation and basically no growth for some time. It’s all a bit bleak really.

Of course, that’s better than where we expected to be at this point so that’s a positive. The data towards the end of the year is actually quite difficult to pick apart due to the impact of one-off or temporary events like the world cup, the loss of premier league football, and most importantly, the many, many public sector strikes that continued into the new year. The negative impact on the pound was brief though as the data doesn’t tell us anything we didn’t already know, nor does it alter the outlook on inflation or interest rates.

First big test of the recovery

After showing solid resilience over the past few weeks, bitcoin finally appears to have entered into a correction phase after falling almost 5% on Thursday. The community won’t be too dismayed by the move as it was never just going to go from strength to strength and this correction will enable us to see just how quickly money pours back in. It should be an interesting couple of weeks.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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