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Last week, the FTSE reached a 12-month peak, breaking free from its long-standing range following a dovish surprise at the Bank of England (BoE) meeting.
While the BoE kept rates on hold at 5.25% as widely expected, a dovish pivot was provided as two BoE members, Mann and Haskel, who had voted for hikes in February, removed their hawkish dissent.
The dovish pivot implies the bar to BoE rate cuts is much lower than previously thought and has resulted in the interest rate market pulling forward, the expected timing of the BoE’s first rate cut to June (17 of 25bp priced) from August. There is currently a total of 72 bp of cuts priced for 2024, up from 66 pre-last week’s BoE meeting.
With a light data calendar this week in the UK and Europe, the focus will be on the release of German consumer confidence data this evening.
What is expected from the GFK Consumer Confidence survey (Tuesday, 26 March at 6pm)
Heading into March, German Consumer Confidence increased to -29 from an eleven-month low of -29.6. Expectations of ECB rate cuts are starting to filter through into some business sentiment surveys, such as the ZEW, which recently jumped to its highest level in two years.
This impact, along with slowing inflation and rising household incomes, should also be observed in upcoming consumer confidence surveys. However as can be viewed on the chart below, a good deal of improvement is required before consumer confidence returns to positive territory.
GFK consumer confidence chart
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