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Wading through the data

Today's news headlines: 

‘Inflation rise marks start of upward trend in UK’. Yesterday’s slight uptick in UK inflation has led economists to predict that the measure of price increases will pass the Bank of England’s 2% target later this year. With Boris Johnson set to announce plans for the easing of lockdown measures from next week, inflation is likely to continue to rise as surging oil prices are passed on to consumers and pandemic induced VAT cuts are reversed. However, it’s unlikely that the UK’s economy will overheat so much as to overshoot the 2% target significantly, as upward pressure would be tempered by rising unemployment, limited earnings and excess capacity. (Financial Times)

‘US retail sales surprise with sharpest advance in seven months’. January saw US retail sales surge by 5.3% from the previous month, after a 1% decline in December, far ahead of economist’s predictions of a 1.1% rise. The reading suggests that fresh $600 stimulus checks are helping to spur economic recovery, following a weak fourth quarter and will give President Biden more confidence that his latest stimulus plan of almost $2tn will help to speed up the recovery. Further reopening of the US will cause a torrent of pent-up demand to be released following US consumers’ aggressive saving patterns from 2020. (Bloomberg)

Today's events, rates, and data 

  • The uptrend in sovereign debt yields, particularly US treasuries, continues to play out as investors bet on a speedy economic recovery from the pandemic as vaccinations proceed. Risk appetite has softened as stocks have come off and the US Dollar has risen 0.8% in the last two days, although commodity prices have remained strong.

Today's events

Australian Unemployment Rate: 6.4% vs 6.6% previously
MPC Member Saunders Speaks: 11.00am
ECB Monetary Policy Meeting Accounts: 12.30pm
FOMC Member Brainard Speaks: 1.00pm
US Philly Fed Manufacturing Index: 1.30pm

Interbank rates

GBP/USD: 1.3875
GBP/EUR: 1.1515
EUR/USD: 1.2050
USD/CAD: 1.2701