Sterling tended to edge lower following the latest UK labour-market data. The tentative slowdown in wages growth increased speculation that the Bank of England might be able to adopt a more dovish policy stance. There was a net overall shift in Bank of England expectations with futures markets indicating a 40% chance that the central bank will leave rates on hold at 4.00%. US and Euro-Zone yields recovered during the day which limited support for the Pound. Sterling was unable to make headway later in the day, but selling pressure was limited as overall global risk appetite attempted to recover. The budget will be released on Wednesday with expectations that energy-support measures will be increased, but the overall impact is likely to be limited.
Key Data
12.30 Budget
There was an underlying tone of consolidation ahead of Tuesday’s New York open with further uncertainty surrounding the financial sector. German yields moved sharply lower at the European open, but there was a rebound later in the session. Expectations are for the central bank to hike rates by 50bps tomorrow and drop its one-meeting-ahead forward guidance, emphasizing data dependency from here.
No Key Data
The US NFIB small-business confidence index edged higher to 90.9 for February from 90.3 previously. The proportion of companies seeing inflation as the most important problem increased slightly on the month. US consumer prices increased 0.4% for February which was in line with consensus forecasts and the year-on-year rate retreated to 6.0% from 6.4% which was also in line with expectations. Food prices increased 9.5% over the year while energy prices increased 5.2% after a monthly decline of 0.6%. Underlying prices increased 0.5% on the month, slightly above consensus forecasts of 0.4%, although the year-on-year increase matched expectations at 5.5% from 5.6% previously. Used vehicle prices dipped for the seventh successive month with a 13.6% annual decline, but there was a strong increase in shelter prices as well as transport services.
Key Data
12.30 Retail Sales (MoM) (Feb) Exp. -0.3% Prev. 3%
12.30 Retail Sales Control Group (Feb) Exp. -1.2% Prev. 1.7%