With the results of the Scottish election released over the weekend, the Scottish National Party will form the next Scottish government, this is their fourth consecutive win. Scotland’s first minister Nicola Sturgeon immediately turned her focus to a second independence referendum stating that it is “a matter of when – not if”.
12 destinations have been put on the green list for the people within England, anyone returning from these countries will not need to quarantine from the 17th of May. The countries on the green list include Portugal, Israel, Singapore, Australia, New Zealand, Brunei, Iceland, Gibraltar, Falkland Islands, Faroe Islands, South Georgia and the Sandwich Islands, St Helena, Tristan de Cunha and Ascension Island. This list will be reviewed every 3 weeks, countries can be taken or added from the list with short notice.
Regarding this week, there has been speculation whilst we are in the lead up to the Bank of England’s policy monetary meeting this week that they may reveal a tapering of its QE bond purchase programme. The BoE did reveal that they are cutting down with the asset purchases, they reduced purchases from £4.4bn to £3.4bn however the QE programme stayed the same at £895bn.
The broad tone in regards to the Bank’s monetary statement and minutes was the positivity for the UK economy; the GDP growth forecast was raised from 5% to 7.25%. It is now expected that the UK economy will regrow to the level it was at before Covid-19 by the end of 2021.
With the labour market conditions, the Bank is now expecting the unemployment rate to go just under 5.5% in the second half of 2021. The report back in February was previously at 7.75%. This is shown with the extension in the March budget of the government’s furlough scheme until September. In regards to the inflation, BoE predicts that the CPI rate will temporarily rise above the 2% target towards the end of the year; the CPI rate is predicted to return around 2% target over 2022-2023.
Despite the positivity towards the UK economy, the Bank may tighten the policy. Interest rates may well start to rise next year. Within the recent month, some future contracts have gone down this avenue, bank rates could go from 0.1% to around 0.25%. There are big expectations from the Bank’s that growth will sit at 1.75% by 2023. The repetition of the ‘Roaring Twenties’ is not expected; therefore, markets are expecting UK rates to rise at a very slow pace.
In further news for this week, the first reading of UK Q1 GDP is due. Even though a firm bounce back is very much anticipated for 2021, it is forecasted for GDP to contract by 1.7% in the starting quarter as the national lockdown hindered most economical movement. Within March there was much stronger economic activity, retail sales rose by 5.4%.
The US has a busy data schedule for this week. Retail sales are forecast to rise by 1% in April, ex-autos up by 0.9%. Sales climbed in March by 9.7% as the US economy started reopening. With the 1% rise expected for April, this would make the retail sales to 18% more than the US’s levels before Covid-19.
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Todays Economic Calendar
EU-19: 09:30 EU Sentix Index (May)
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