Main currency pairs steady

The main currency pairs are largely in consolidation mode after the moves seen earlier in the week. The euro is trading just below $1.09 against the dollar and at around 85.8p against sterling, while the latter is at about $1.268 against the US currency. Much weaker than expected UK retail sales data released earlier this morning haven’t had much impact on the pound.

Government 10-year bond yields continued to nudged higher yesterday (although UK yields ended a little lower after rising sharply on Wednesday), while there was some respite for equity markets with European and US stocks gaining around 1% or so.

The IMF has advised central banks to “move cautiously” on interest rates as the path to getting inflation down closer to target is likely to be “bumpy,” saying that “based on the data we have seen, we would expect rate cuts to be in the second half (of this year), not in the first half.”

Retail sales in the UK were much weaker than expected in December with volumes falling by 3.2% from November (-0.5% expected), the largest monthly decline since January 2021. For the period October to December volumes were down 0.9%, which will have weighed on GDP growth in the final quarter of last year.

Economic data due today include US consumer confidence and inflation expectations for the University of Michigan survey, while a few Fed members are scheduled to speak.