UK's recession status amplifies anticipation for January GDP and BoE meeting

A dovish outcome from the European Central Bank (ECB) meeting last week, marked by reduced inflation forecasts, has driven the DAX to its fifth consecutive week of gains. This week, the focus shifts to the UK, with the release of January's Gross Domestic Product (GDP) figures set before the next UK inflation report.

These figures will set the stage for the Bank of England's interest rate meeting on 21 March. Readings lower than expected could lead the market to anticipate earlier Bank of England rate cuts, especially after the UK economy recently entered a recession.

UK GDP expectations for January

Date: Wednesday, 13 March at 6pm AEDT

Last month's National Accounts indicated the UK economy contracted by 0.3% in Q4 2023, marking the nation's entry into recession since the Covid-19 pandemic, following a 0.1% contraction in Q3 2023.

Despite the challenges of strikes and inclement weather, the upcoming release of January's monthly GDP data is expected to show a slight increase of 0.1%, buoyed by better-than-expected Purchasing Managers' Index (PMI) figures.

A number lower than expected could increase the likelihood of the Bank of England (BoE) accelerating the pace of interest rate cuts this year. Currently, the rates market anticipates the first BoE rate cut in August, with a total of 72 basis points of cuts expected for 2024.

UK monthly GDP

DAX technical analysis

The DAX experienced its fifth week of record highs last week, albeit with more modest gains than in previous weeks, which helped to alleviate some overbought conditions.

For an indication that the recent slowdown in momentum might precede a pullback, we would need to see a break below horizontal support at 17,600, based on last week's lows, followed by a sustained drop below uptrend support at 17,450 from the October low of 14,666.

Until then, minor dips are likely to find support from investors aiming to capitalize on the continuing uptrend and potentially test the 18,000 mark.

DAX daily chart

FTSE technical analysis

The FTSE begins this week under the familiar resistance at approximately 7750/65, which has constrained it for the last nine months. A sustained move above this level could justify a shift to a positive outlook, eyeing a retest of the April high of 7936, with potential to reach the 8047 peak.

However, as long as the FTSE remains below the 7750/60 resistance, there's a strong possibility of further movement towards the support region at 7550/00, informed by the 200-day moving average and the mid-February low of 7492.

FTSE daily chart

• ^{Source: TradingView. The figures stated are as of 12 March 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}