Sterling a touch softer

The main currency pairs are not much changed from yesterday morning. The euro continues to hover just below the $1.08 level against the dollar and is trading at around £0.8370 against sterling, while the latter has dipped below $1.29 against the US currency. UK inflation data released a short while ago were weaker than the consensus forecast, which is weighing a little on the pound.

US bond yields nudged down a touch yesterday, partly on the back of some soft economic data, while both UK and German yields were marginally higher on the day. In equity markets, European stocks rose by around 1%, largely playing catch-up with Monday’s gains in US equities, while the latter ended with small gains yesterday.

Headline CPI inflation in the UK fell back in February according to this morning’s release, declining to 2.8% from 3% in January, while the core rate also fell, to 3.5% from 3.7%, both a little lower than the consensus forecast (3% and 3.6% respectively). Within core, following a string of increases, goods inflation fell last month, to 1.1% from 1.6%, helped by a large decline in clothing and footwear price inflation, but services inflation remained unchanged and still elevated at 5%, which will be of some concern to the Bank of England.

In the US, consumer confidence declined for a fourth consecutive month in March according to the Conference’s Board measure. Consumers’ expectations were “especially gloomy, with pessimism about future business conditions deepening and confidence about future employment prospects falling to a 12-year low.”

 For the day ahead, it’s relatively quiet in terms of economic data with durable goods orders in the US the only release of note. In the UK, Chancellor Rachel Reeves delivers her Spring Statement in Parliament, where she is expected to announce spending cuts of circa £10bn as she attempts to meet her fiscal rules.