Sterling held a firm tone ahead of Thursday’s New York open with further support from underlying money-market yields and expectations of further short-term rate hikes by the Bank of England. There were strong expectations that the central bank would increase rates again in March with some speculation that the bank could sanction a 0.50% rate hike. UK retail sales increased 1.9% for January after a revised 4.0% decline for December an annual increase of 9.1%. Sterling held a firm tone after the data and traded a high against the dollar. Overall global risk trends will continue to have a significant impact on UK markets during the day.
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The Euro was hampered by persistent concerns over the Ukraine situation ahead of Thursday’s New York open, but there was only limited selling. ECB chief economist Lane stated that inflation is mostly an imported inflation shock and that there is no boom in domestic demand. He added that the size and frequency of rate moves will depend on inflation. He added that other increments were possible beyond 0.25% moves.
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US initial jobless claims increased to 248,000 in the latest week from a revised 225,000 the previous month and above consensus forecasts of 220.000. Continuing claims, however, declined to 1.59mn from 1.62mn previously. The Philadelphia Fed manufacturing index retreated to 16.0 for February from 23.2 previously and slightly below consensus forecasts of 20.0. There were also slower rates of growth for production, new orders and unfilled orders, but the figures remained solid.
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