Pound under pressure

Sterling is under pressure this morning as Bank of England-fuelled speculation about a near-term cut in UK interest rates weighs on the currency, which has weakened to around 85.5p against the euro and to about $1.30 against the dollar. The latter, meanwhile, is a touch softer against the single currency at $1.1125, which is about a half a cent off last week’s best level

Oil prices have fallen following the de-escalation in US-Iran tensions, with Brent crude back below $65 per barrel (from over $70 at one point), which also contributed to modest gains for equity markets last week and an increase (albeit limited) in core bond yields

Outgoing Bank of England Governor, Mark Carney, says the Monetary Policy Committee (MPC)is debating “the relative merits of near term stimulus (i.e. a cut in interest rates) to reinforce the expected recovery in UK growth and inflation” on foot of an expected reduction in Brexit uncertainty and a stabilisation in global growth. Two of the nine-member MPC have voted for a cut in interest rates at recent meetings, and two more in the last few days have said they are inclined to do likewise, so the markets’ focus will now be very much on the MPC’s next meeting at the end of this month (January 30th)

Employment in the US rose by 145k in December, according to Friday’s payrolls report, just a tad less than the consensus forecast and following very strong job gains (256k) in November, and the unemployment rate remained at a multi-decade low of 3.5%, though wage pressures eased with the annul rate of growth in hour earnings slipping to 2.9%, all of which together should leave the Fed happy to continue to keep interest rates on hold

There is a heavy schedule of UK data this week including GDP today, CPI inflation on  Wednesday, and retail sales on Friday, while CPI inflation and retail sales are due in the US tomorrow and Thursday respectively