Dollar and sterling advance

The dollar and sterling both advanced against the euro yesterday, with EUR/$ dipping below $1.06 for a time and the pound strengthening to under 85p. (The dollar is a touch softer this morning, though, after news of the resignation of Trump’s National Security Adviser)

Bond yields in the US and the UK rose relative to German yields, which probably provided some support to the respective currencies, with 10-year yields increasing by 4bps

Equity markets advanced further with European and US both chalking up gains

The EU Commission has revised up its forecasts for growth in the Euro area economy and expects GDP to increase by 1.6% and 1.8% this year and next respectively

CPI data in the UK this morning is expected to show inflation picked up further in January, to 1.9% according to the consensus forecast. The Bank of England expects inflation to be running at almost 3% by around this time next year, mainly reflecting the impact of sterling’s depreciation

Fed Chair Janet Yellen testifies to Congress today on the outlook for the US economy and monetary policy – she is likely to reiterate that economic conditions will warrant gradual increases in interest rates