Data emerging from the United States has shown weaker-than-expected growth, with the fourth quarter GDP increasing by just 0.6% quarter-over-quarter. This development comes as the "jobs plentiful" index has dipped to its lowest level since September, reflecting a cooling labor market. Despite these changes, investors received little new information from the Federal Reserve and the European Central Bank (ECB), leaving markets in a state of anticipation.
The upcoming week promises to be eventful, with a packed calendar featuring key economic data releases and political developments. In the United States, ISM data, JOLTs, and a jobs report are expected to capture market attention. Meanwhile, across the Atlantic, the ECB cut its key interest rates by 25 basis points in a unanimous decision, aligning with market expectations. This move comes amid a backdrop of declining expectations, which have reached their lowest level in a year.
Danske Bank A/S, regulated by the Financial Services Authority in the UK, continues to uphold its policy wherein research analysts are prohibited from investing in securities within their coverage sector. This ensures impartiality and credibility in their economic analyses and forecasts.
In a significant policy shift, the Bank of England is anticipated to reduce its policy rate by 25 basis points to 4.50% on Thursday. This decision aligns with recent economic indicators, including unexpected declines in German inflation across several Bundesländer, which resulted in a drop of 10 basis points in two-year Bund yields. The new year has witnessed stronger economic signals, supported by the current situation index from IFO data and better-than-expected German PMI data for January.
Meanwhile, the dollar has shown steadiness after a prolonged period of volatility. This stability is attributed to mixed economic signals and cautious investor sentiment. Furthermore, expectations for economic growth have been tempered, as reflected in decreasing confidence indices.
The political sphere will also see significant developments as French Prime Minister François Bayrou faces a no-confidence vote later this week. This political maneuver adds another layer of complexity to an already dynamic global economic landscape.
Additionally, the first tariffs in the US are set to take effect over the weekend. These tariffs are expected to impact international trade dynamics and could lead to adjustments in global supply chains.