Sterling on the front foot

The pound is on the front foot this morning and has strengthened to almost 86.5p against the euro – its best level in just over twelve months – and to just shy of $1.40  against the dollar – its best level in almost three years. The single currency has also regained some ground against the dollar to trade back above the $1.21 level again

US equity markets have retreated a little further from last week’s all time highs, closing down around 0.5% yesterday, while European stocks shed around 1%. Bond yields in the core markets edged higher with German 10-yields now at -0.33% and equivalent US yields at 1.30% (fixed/swap rates have also been moving up recently in line with the move higher in bond yields)

Retail sales in the UK fell sharply in January as public health restrictions were tightened, falling in volume terms by 8.2% from December, though as suggested by the pounds rise, markets are looking beyond the here and now to the prospect of a vaccination-driven economic recovery later

The vaccination roll-out appeared to lift the mood of UK consumers this month though, with the GfK measure of consumer confidence improving from January albeit not surprisingly it still remains a good bit below its pre-pandemic level

Data due today includes flash PMIs for February in the Euro Area, UK and US