Investors have lowered their expectations that the Fed will cut rates in March and now see four cuts this year, most likely starting in May. The latest US consumer inflation data, due on Tuesday, will be closely watched for indications supporting that view – or otherwise. Recent comments from the central bank have become more cautious regarding when the pivot might come – there are speeches due this week from several Fed officials.
Officials from the European Central Bank have also been playing down the idea of imminent rate cuts. Chief Economist Philip Lane said that the ECB needs more evidence that inflation will reach its 2% target before a cut in interest rates would be considered.
UK inflation figures are also due this week as well as all-important GDP data from the ONS. The UK economy shrank by 0.1% in the third quarter of 2023 and if, as expected, the fourth quarter shows a similar contraction, it would mean the UK tipped into a technical recession at the end of last year. The yield on the UK 10-year gilt ended last week above 4% and remains above that level today (Monday)
The US earnings season is into its fourth week. Coca Cola, Cisco, Airbnb and other major companies will be reporting.
US Risk Barometer 9th February 2024
Europe Risk Barometer 9th February 2024
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