The UK and Japan confirmed their respective economies entered into a recession in the second half of 2023. The pound has eased after the announcement but the yen remains propped up by the threat of FX intervention.
(AI Video Summary)
Both Japan and the UK are going through recessions, which means their economies are shrinking. In Japan, the GDP went down by 0.1% in the last quarter, even though experts predicted it would grow by 0.3%. This has worried people about Japan’s growth prospects leading many to believe the government will extend its fiscal support measures. The Bank of Japan is considering tightening monetary policy if it reaches its inflation goal, which could eventually necessitate the easing or discontinuation of fiscal support. This has been put on the backburner for now.
In the UK, quarter on quarter (QoQ) GDP went down for the second time in a row, plunging the economy into a recession. This has made the British pound weaker as markets ramp up rate cut bets for the Bank of England (BoE).
The spring statement in March is when the government will talk about its plans for the economy. They might try to cut taxes, something that political commentators have been lining up as a potential attempt to win back the voter base ahead of general elections this year. But the Bank of England is worried about wages growth and underlying prices going up, especially in the services sector. So there might be a difference between what the government wants to do (accommodative fiscal policy) and what the central bank wants to do (contractionary monetary policy). The British pound is also trading lower against the US dollar and the Euro.
The FTSE 100 is an index that shows how well companies in the UK are doing. It hasn’t been doing as well as US stock markets because it doesn’t have as many tech companies. It has been stuck in a large range and is currently trading above the 200-day simple moving average. If it goes down more, it might test the 7420 level, but if it finds support at the 200 SMA it may eye 7640 or even 7710.
Oil prices have reached a level of $77.40 per barrel, which is also the average price over the last 200 days. There is a line that shows the prices going up and down, and right now it’s going up. But there might be a pullback, which means oil prices might go down again towards $70.50.
The US will release data about how much people are spending soon, which will help us understand how well the US economy is doing.