UK inflation picks up in February

The annual rate of inflation in the UK jumped to 2.3% in February (from 1.8% in January), its highest level since September 2013. The Bank of England expects inflation to reach almost 3% in the opening quarter of 2018, though it also sees higher inflation eroding households’ purchasing power and thus dampening spending

The latest inflation reading reinforced the markets’ expectation that the Bank of England will raise interest rates over the coming twelve months,  which contributed to some strengthening in sterling against both the euro (to 86.5p) and the dollar (to almost $1.25)

US equity markets lost ground yesterday with the S&P 500 shedding almost 1%, its biggest one day decline for some time. The rally in US bonds continued as stocks fell, with 10-year yields closing down another 5bps or so at circa 2.4%

The dollar generally remains under pressure, as it has been since last week’s Fed meeting, falling further to over $1.08 against the euro and slipping to Y111 against the Japanese yen

It’s a quiet day for economic data with existing homes sales in the US the only release of note