Quiet start to the trading week

It was an uneventful start to the week in FX markets with the main currency pairs largely unchanged. The euro remains in and around $1.0850 against the dollar this morning while sterling is trading at $1.2670, leaving EURGBP at about £0.8550.

It was similarly quiet in bond and equity markets yesterday. US 10-year bond yields ended marginally higher on the day, while equivalent German and UK yields closed a touch lower. In equity markets, the S&P 500 finished slightly off Friday’s record high but European stocks chalked up modest gains.

Oil prices have nudged lower despite OPEC+ announcing an extension to its output curbs (which had been expected) with Brent crude just below $82.5 per barrel, within the range of around $75 to $85 that has prevailed since late last year.

The Bank for International Settlements (BIS) has warned that sticky services price inflation, which has been slow to come down in the main economies, may mean “monetary policy may need to remain tight for longer to achieve a given inflation objective”.

Consumer demand in the UK was dampened by the wettest February on record according to the British Retail Consortium, with “not even Valentine’s Day (lifting) customers out of the gloom”, as the year-on-year growth in the value of (same store) retail sales slowed to 1% last month from 1.4% in January and 1.9% in December.

China has set its annual growth target at around 5%, while at the same time saying it will not be easy to achieve the target and that “policy support” will be needed to do so. The economy grew by just over 5% in 2023, after relatively weak (pandemic-related) growth of 3% in 2022. The IMF sees the economy growing by just over 4% this year, and by just under 4% a year on average over the period 2025-2028.

Economic data due today include services PMIs (final readings for February) in the main economies, as well as producer prices in the Euro area and the ISM services index in the US.