In comments on Friday, Bank of England MPC member Mann stated that she voted for a 0.50% rate increase at the February meeting to dampen inflation expectations and she had seen little evidence that public expectations were easing. She also pointed to a global dynamic as Sterling could decline if the Bank of England lagged behind other major central banks and this would risk even higher inflation. There were still expectations that the central bank would back away from a 0.50% rate hike in March. Sterling overall was unable to make significant headway despite more favourable global risk conditions with an underling erosion of yield spreads in global terms limiting potential support. The fresh slide in risk appetite sapped Sterling support on Monday with lows against the dollar before a tentative recovery while the Euro posted a significant net loss with further choppy trading in prospect with month-end position adjustment and fluctuations in global risk conditions.
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Euro-zone money supply growth slowed to 6.4% in the year to January from 6.9% previously. Euro-zone industrial sentiment increased marginally to 14.0 for February from 13.9 previously while there was a much larger improvement for the services sector at 13.0 from 9.1 in January. The overall business and consumer confidence index strengthened to 114.0 from 112.9 in January, but political developments tended to dominate. Risk appetite was fragile in early Europe on Friday amid reports that Russian forces had advanced close to Kyiv.
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15.50 Christine Lagarde Speech
The US core PCE prices index increased 0.5% for January which was in line with expectations while the year-on-year rate increased to 5.2% from 4.9% and slightly above market expectations of 5.1%. Personal spending increased 2.1% for January after a revised 0.8% decline the previous month. At this stage, markets expect that the Federal Reserve will push ahead with a 0.25% rate hike at the March meeting.
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