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Real-time News
Britains new defense secretary: Investment plans are still being finalized.On June 12th, Morgan Stanley economist Bruna Skarica noted in a report that UK monthly GDP appears to be benefiting again from strong performance in the white-collar services sector, particularly the information and communications technology (ICT) industry. She pointed out that output in this sector is currently up 6.7% year-on-year, and has grown by 45.4% since the fourth quarter of 2019, while the overall economy has only grown by 6% during the same period. "It seems far from a coincidence that the sector most vulnerable to the rapid spread of artificial intelligence is simultaneously driving GDP growth and productivity gains," Skarica added. Given that the Bank of England stated last year that structural productivity growth in the UK was negative, the bank should comment further on this this year.On June 12th, HSBC analysts noted in a report that the US dollar is currently trading below levels implied by market expectations of US interest rates. They stated that the dollars reaction has been limited as recent market expectations have shifted from anticipated rate cuts to possible rate hikes. They believe this may reflect the loose financial environment in the US and market expectations for a resolution to the Middle East conflict. They added that the dollar needs clear stimulus from monetary policy. If the Federal Reserve fails to support rate hike expectations at next weeks meeting, the dollar "could be in trouble."On June 12th, analysts at Nomura Securities stated in a report that the Bank of England is likely to raise interest rates by 25 basis points in July to avoid the risk of a second wave of inflation. However, with inflation risks diminishing, they believe the Bank of England is likely to resume rate cuts in 2027. LSEG data shows that investors expect a 34% probability of a rate hike by the Bank of England in July.On June 12th, Berenberg analysts stated in a report that the Bank of Englands reluctance to raise interest rates compared to the European Central Bank appears to have its reasons. They noted that the UKs labor market is weaker than the Eurozones, and the service sectors contribution to inflation is no longer as significant as it once was. Meanwhile, analysts pointed out that the UKs interest rate policy was already tighter before the energy shock, and its fiscal situation remained relatively strained. They added that after a strong start to the year, the UK is now facing an economic slowdown as the situation in Iran continues to drag down economic activity. Due to a "statistical illusion" caused by seasonal changes in consumption patterns since the pandemic, the first quarters economic performance was actually weaker than it appeared. The analysts stated, "We predict that the economy will stagnate this summer, with zero quarterly GDP growth in the second and third quarters."
