Main currencies little changed

The main currencies are little changed this morning with the euro and sterling continuing to hover a little below $1.20 and a touch under $1.40 against the dollar respectively. The single currency-pound exchange rate is thus also largely unchanged trading in and around 85.5p

European stocks gained ground for a fourth consecutive session yesterday, bringing their cumulative gains to almost 5%, while US equities closed up around 1% at new all-time highs. Meanwhile, German 10-year yields ended the day slightly lower at -0.34% with equivalent US yields closing a touch higher at 1.54% (though the latter have spiked to almost 1.60% in overnight trading in Asia)

The ECB left both interest rates and the size of its emergency bond purchases programme unchanged at yesterday’s meeting. However it said it would increase “significantly” the pace at which it will buy bonds in Q2 (relative to the first quarter) in order to preserve favourable financing conditions, noting that bond yields have been rising since the start of this year which if left “unchecked could lead to a premature tightening of financing conditions for all sectors of the economy”

The UK economy contracted in January as tighter public health restrictions took at toll on activity with GDP falling by 2.9% from December (leaving it some 9% lower on January 2020). Not surprisingly, the services sector led the decline with output falling by 3.5% on the month

President Biden has signed into law his $1.9 trillion stimulus package, which should begin to have a pretty immediate impact on the US economy during the second quarter of this year

Data due today includes industrial production in the Euro Area and consumer confidence in the US