Markets pricing in two-thirds likelihood of BoE rate cut in March
|Sterling was largely flat after a week of mixed political news from the UK.
On the positive side, Starmer's leadership seems safe, for now, after a handful of his cabinet members rallied in support of the prime minister. On the other hand, it appears as though the left wingers within the Labour Party seem to be gaining greater influence, and a leadership challenge and a shift to the left following the May elections still appears to be a genuine possibility.
Last week’s fourth-quarter GDP report was disappointing and confirmed that Britain’s economy was stuck in effective stagnation in the second half of last year.
This will be followed by equally critical inflation data on Wednesday and the latest PMI numbers on Friday. Markets are pricing in about a two-thirds likelihood of a cut at the next Bank of England meeting in March, but we will have a much clearer view after this week's data deluge.
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