US and UK Economic Resilience Challenges Rate Cut Expectations for Fed and BoE

Commerzbank analysts project US GDP growth to reach 3.7% in Q4, significantly outperforming the 3.0% consensus, while core PCE is expected to rise by 0.36%. Simultaneously, the UK economy showed unexpected strength as the composite output PMI rose to 53.9 in February, defying forecasts of a decline. Nomura analysts have also projected UK GDP growth of 0.2% for the first quarter of 2024, signaling a recovery from previous stagnation. This robust activity in both the US and UK suggests upside risks to growth and persistent inflation, challenging current market pricing for interest rate cuts by the Federal Reserve and the Bank of England. Consequently, the 'higher-for-longer' narrative is gaining momentum, supporting the US Dollar and Pound Sterling while pressuring bond markets and delaying expectations for monetary easing.