Sterling loses some ground

Sterling has lost ground against both the dollar and the euro, shedding almost a cent against the former to about $1.3475 and giving up half a penny or so against the latter to trade close to 84p, while the single currency continues to hover just above $1.13 against the dollar

Equity markets remained on the back foot yesterday with European stocks down around 3-4%, though US indices, which had been around  2% lower at one stage, rallied late on to close slightly higher on the day. Government bond yields nudged down some more with US and German 10-year yields now at 1.75% and -0.10% respectively with equivalent UK yields just shy of 1.10%

The Composite PMI for the Euro area dipped for a second consecutive month in January according to yesterday’s flash reading (though it remained in expansionary territory at 52.4),  suggesting Omicron’s spread took a further toll on the pace of economic activity in the zone this month

Another slowdown in services sector activity resulted in a further albeit marginal decline in the Composite PMI for the UK this month (but it remained in expansionary territory at 53.4), with hospitality, leisure and travel all reported to have struggled with Omicron restrictions

More positively, the PMI data also show manufacturing in both the Euro area and the UK performed well this month, helped by a reported alleviation of supply chain delays/turnaround in the availability of materials which boosted production

Data due today includes consumer confidence and house prices in the US, while the Fed begins its two-day monetary policy meeting