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According to BCA Research’s Global Investment Strategy service, aggressive fiscal stimulus and labor market flexibility contributed to the relative strength of the US consumer. However, adverse region-specific effects also played a role. Most notably, the…
The UK unemployment rate surprised to the upside in the 3-month period ending in April, ticking up to 4.4% against expectations it would remain stable at March’s originally reported 4.3%. Concurrently, wage growth remains elevated. The 3-month measure of…
UK retail sales plunged 2.3% m/m in April from a downwardly revised 0.2% m/m contraction in March, significantly undershooting expectations of a 0.5% m/m decline. Household goods as well as clothing and footwear stores led the shortfall. Retailers have…
The UK CPI release surprised markets to the upside across the board on Wednesday. Headline CPI increased 2.3% year-on-year, above expectations of 2.1%. Core surprised to the upside as well, moderating from 4.2% to 3.9%y/y, less than the moderation embedded in…
Preliminary GDP estimates suggest that the UK economy started growing again in Q1, thus exiting a technical recession in the past two quarters. Q1 growth came in at 0.6%, improving from a 0.3% contraction last quarter, surpassing expectations of 0.4%. On a…
In a widely expected move, the Bank of England (BoE) maintained its policy rate at 5.25% in May. Nevertheless, two Committee Members voted in favor of cutting rates, one more than was anticipated. The tone of the report was overall dovish. The BoE…
An update to our views on UK rates and currency following today’s Bank of England meeting.
According to BCA Research’s Global Fixed Income Strategy service, a hard landing is the only way to solve the UK inflation problem. Sticky inflation and lingering inflation pressures have made the BoE’s job much more challenging. The UK economy weakened in…
The UK labor market remains far too tight to expect wage growth to slow to levels consistent with the Bank of England inflation target. A true recession with rising unemployment is needed to finally slay the UK inflation beast. 2024 rate cuts are off the table, with the central bank having to keep monetary policy tighter for longer than markets expect and the UK economy now rebounding. We recommend downgrading UK gilts to underweight in global bond portfolios, while also looking for opportunities to buy the British pound on pullbacks versus the euro, Canadian dollar and Swedish krona.