UK GDP slumps to -0.3%, putting pressure on the BoE

• Japan falls into recession, with Q3 revision highlighting dour growth picture.

• UK GDP slumps to -0.3%, putting pressure on the BoE.

• Coinbase earnings in view as Bitcoin gains help boost the trading platform.

European markets are on the rise in early trade today, with the FTSE 100 lagging its mainland peers after the UK slumped into a technical recession in the fourth quarter. Unfortunately, the UK wasn’t the only country to fall into recession in the fourth quarter, with Japan announcing a disappointing -0.1% Q4 decline alongside a hefty downward revision that put the third quarter figure at a three-year low of -0.8%. While markets continue to expect the Bank of Japan to raise interest rates after keeping them below zero for eight years, the recent weakness in both growth and inflation data do little to help build a story of strength for the Yen.

The UK economy fell into a technical recession in the fourth quarter, with today’s -0.3% figure representing the worst quarterly rate of growth since early 2021. Coming hot on the heels of yesterday’s inflation report that saw both headline and core CPI move sharply lower for the month of January, we are seeing a perfect storm build that puts the Bank of England in a prime position to cut rates in the coming months. Concerningly, we have also seen UK GDP per head continue to trend lower, with the tepid economic growth seen over recent years only coming about through an increase in the population rather than any improvement in the economy per se. With the UK economy growing at a mere 0.1% for 2023, tomorrows retail sales figure could further turn the heat up on the Bank of England. Coming off the back of a concerning -3.2% slump in December, any additional signs of weakness in UK consumption will further embolden dove calls for a swift pivot from the BoE.

All eyes turn towards Coinbase today, with the Crypto trading platform hoping to build on the momentum being felt throughout the asset class. Bitcoin looks set for yet another bumper week, with price rising through $52,000 to bring a two-year high for the Crypto posterchild. Coinbase investors will hope to see the company’s trading revenues build alongside the price of the assets being traded, with this week seeing the stock gain 24% despite Bitcoin gaining just 8% over that same period. Nonetheless, the perceived return of flows back into the Crypto space should help Coinbase turbocharge their revenues, with today’s earnings report likely to show a ramp-up in trading activity in a quarter that saw Bitcoin rise 56% against the dollar.