Euro loses ground

The euro has lost some ground against both the dollar and sterling to trade back under $1.21 and below 87p respectively this morning. The pound is very marginally lower against the US currency trading just below the $1.39 level

A notable feature of recent developments in markets has been an increase in core bond yields, most likely in response to the prospect of a vaccine-driven economic recovery later this year and into 2022. This continued yesterday with US 10-year yields up about 10bps to 1.30% and equivalent German yields up almost 5bps to -0.35%

The Euro Area economy contracted in the final quarter of 2020, with GDP falling by 0.6% from Q3 leaving it 5% lower than in the corresponding quarter in 2019. For 2020 as a whole, GDP fell by 6.8% from 2019

The annual rate of CPI inflation in the UK ticked up in January to 0.7% (from 0.6% in December) with the core (or underlying) rate holding steady at 1.4%, both below the Bank of England’s inflation target of 2%

Data due today includes retail sales and industrial production in the US