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German industrial production declined 0.3% for December following a 0.3% increase the previous month. The Euro-zone Sentix investor confidence index strengthened to 16.6 for February from 14.9 previously and above consensus forecasts of 15.2. Market conditions were relatively subdued during Monday which is often the case on the Monday following a US jobs report with markets assessing the outlook for global interest rates.

The US employment trends index edged lower to 117.6 from a revised 117.9 the previous month, but there was no significant impact from the data with confidence in the labour market and the immediate focus turning to the latest CPI inflation data due on Thursday.

ECB President Lagarde stated that inflation would remain high in the short term, but still considered that price pressures would subside before higher inflation becomes entrenched, especially with no evidence of excess demand. Nevertheless, she also commented that the central bank needed to maintain flexibility and optionality in the conduct of monetary policy more than ever. The bank will have more options once the emergency bond-buying comes to an end in March.

She also noted that risks to the economic outlook are balanced over the medium term. The overall rhetoric was slightly less hawkish than expected following last week’s council meeting and the Euro edged lower, although overall ranges were relatively narrow.

Markets continued to monitor the Ukraine situation with French President Macron holding talks with Russian President Putin, although there was no significant market impact. The Euro drifted lower on Tuesday with a retreat to around 1.1415 with some concerns over the impact of widening Euro-zone yield spreads.




There was choppy trading in US Treasuries during Monday, although yields overall edged higher as markets continued to monitor the potential for global monetary tightening. Wall Street equities tended to drift lower with the yen able to resist further losses on the crosses and the dollar retreated to test support below the 115.00 level. There were no significant comments from Fed officials during the day.

US Yields continued to move higher in Asian trading On Tuesday with the 10-year yield moving to just below 1.95% and the highest level since late 2019. US equity futures were little changed despite higher yields while Asian equity markets were mixed with slight overall net gains.

Higher bond yields underpinned the dollar with a move to around 115.50 against the yen with the Euro little changed around 131.80. There will be an element of caution ahead of the US CPI inflation data due on Thursday given the importance for interest rate expectations with Wall Street trends also watched closely.




Halifax reported a 0.3% increase in house prices for January, the slowest rate of increase since June 2021, although the year-on-year rate was unchanged at 9.7%. There was little impact from the data with markets expecting a gradual easing of house-price inflation due to pressure on household spending this year.

There were further doubts whether the Bank of England would be in a position to tighten monetary policy aggressively given the squeeze on incomes with the bank hoping that a short cycle of rate hikes would curb the threat of a wage-price spiral and prevent a sustained increase in interest rates.

There was little impact on the UK currency from global risk conditions with little net change in equities while there was no market impact from ongoing political developments. Sterling found support just below 1.3500 against the dollar and secured a marginal net advance while the Euro retreated to just below 0.8450.

BRC data recorded an 8.1% increase in like-for-like retail sales for January from 0.6% previously as sales were hit by lockdowns last year. Barclaycard reported a 7.4% increase in consumer spending since January 2020, although this was the weakest figure since April 2021.

Narrow ranges prevailed on Tuesday with the UK currency trading around 1.3525 against the dollar with the Euro around 0.8440.




Swiss total sight deposits increased marginally to CHF725.0bn in the latest week from CHF724.9bn the previous week which suggested that the National Bank had not intervened significantly to weaken the Swiss currency, limiting the scope for further franc selling.  

The Euro was unable to make further headway with further selling close to 1.0600 and retreated to near 1.0565 as the less hawkish rhetoric from ECB President Lagarde sapped support. The dollar drifted lower to around 0.9240 before a tentative advance to just above 0.9250 on Tuesday as the US currency edged higher.

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Today's Calendar 



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