UK gilts rise ahead of January manufacturing, construction PMI

The UK gilts rose Wednesday ahead of the country’s manufacturing and construction PMIs for the month of January, scheduled to be disclosed on February 1 and 2 by 09:30GMT respectively.

The yield on the benchmark 10-year gilts, slipped nearly 1 basis point to 1.44 percent, the super-long 30-year bond yields fell 1-1/2 basis points to 1.88 percent and the yield on the short-term 2-year traded flat at 0.61 percent by 10:15GMT.

Brit consumers started the New Year in a slightly better mood, according to the overnight release of the latest GfK consumer confidence survey. The headline indicator rose by 4pts in January to a four-month high of -9. All survey components were somewhat stronger, but the forward-looking indicators for expectations of how personal finances and the economy will develop this year increased by more than the backward-looking ones.

And the improved outlook also seems to have made consumers a little more confident about making major purchases, with the relevant indicator up by 5pts to 1. However, while GDP growth at the end of 2017 was a touch stronger than many expected and the latest employment growth figures surprised on the upside, there is little new economic data to suggest that the squeeze on household budgets has significantly eased.

And so, despite today’s improvement, overall consumer confidence remains at a low level merely in line with the average for last year, and we are likely to need to see some good news about the developments in real wages before consumer confidence returns to higher levels. Of course, the inflation outlook is key in that regard, and the BRC Shop Price index, also released overnight, suggested that inflation on the high street inched up again in January to -0.5 percent y/y, having eased from -0.1 percent y/y to -0.6 percent y/y in December, with both categories for food and non-food inflation showing an increase.

Meanwhile, the FTSE 100 traded 0.05 percent higher at 7,590.25 by 10:20 GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bearish at -183.10 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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