There were no domestic releases during with Bank of England expectations and risk conditions tending to drive the UK currency. Following the latest inflation data, there were further expectations that the central bank would adopt a more dovish policy stance. Yield considerations tended to undermine the currency, although with some hopes that improved fundamentals would underpin capital inflows. UK retail sales data recorded a 0.5% increase for January compared with expectations of a 0.3% decline, but there was a 5.1% annual decline.
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On Thursday, the ECB released the Economic Bulletin, with updates on the economic, financial and monetary developments in the Euro Area. The document showed that the Governing Council saw weakening global economic activity at the turn of the year, following robust growth in the third quarter of 2022. It also noted that “future policy rate decisions will continue to be data-dependent and follow a meeting-by-meeting approach.”
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US producer prices increased 0.7% for January after a 0.2% decline the previous month and above consensus forecasts of a 0.4% increase, although the year-on-year increase still declined to 6.0% from 6.5%. Underlying prices increased 0.5% on the month with the year-on-year rate declining to 5.4% from 5.8%, but above expectations of 4.9%. The data overall indicated that there were still significant inflation pressures within the economy. The Philadelphia Fed manufacturing index dipped to -24.3 for February from -8.9 the previous month and well below expectations of -7.5. Production remained in positive territory, but there was a further notable decline in new orders and unfilled orders also continued to decline. There was a small increase in employment while the average workweek edged lower. Cost pressures were little changed while there was an easing of upward pressure on prices received for the month.
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