DAVY VIEW

This morning’s UK GDP data – showing a 0.3% contraction in March, led by the services sector – are worrying but may reflect temporary factors such as public sector strikes. April’s Services PMI at 55.9 gave a more upbeat picture. Despite little clear guidance from the Bank of England yesterday, markets are still pricing in one more rate hike to 4.75%. The Bank also made unusually large upward forecast revisions, no longer expecting a recession, with GDP to expand by 0.25% in 2023 versus the 0.5% contraction previously.