The UK’s GDP for January surpassed expectations, growing by 0.3% compared to the predicted 0.1% growth rate. The market is waiting for the budget announcement on Wednesday, with high-profile policy areas such as energy subsidies and UK corporation tax to 25% under scrutiny. These policy decisions will impact UK inflation, and businesses eagerly anticipate any other assistance the Chancellor may offer.
Concerns about the Eurozone’s economy slowing down while the ECB quickly hikes rates have arisen as the revised Q4 GDP for the region remained at zero. The EURUSD came under pressure last week as the Fed Chair, Jerome Powell, confirmed his determination to control ‘sticky’ US inflation. The market expects a 0.5% rate hike on Thursday, but businesses are keen to know how hawkish the accompanying message from the ECB will be. With ECB policymaker Holzmann suggesting hiking rates by 0.5% in March, May, June, and July, businesses are waiting to see if this suggestion will be implemented.
The Federal Reserve has a delicate balancing act to perform, as discussed by FOMC Chair Jerome Powell during his testimony to the US Senate banking committee. The main goal of the FOMC is to return inflation to 2% as quickly as possible. The Non-Farm Payrolls posted a bullish 311,000 new jobs in February, although the unemployment rate rose to 3.6% from last month’s 3.4%. The US CPI is set to be released on Tuesday, and businesses are curious to see if it will support the Fed’s hawkish stance. Silicon Valley Bank’s bankruptcy and the decline in share prices for a few other US banks have raised questions about whether the US government can successfully underwrite the deposits on the account and what the knock-on effect will be on the broader US economy.