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UK gilts surge on safe-haven demand as Brexit worries boomerang ahead of BoE’s monetary policy meeting

The UK gilts surged Tuesday on rise in safe-haven demand as Brexit worries made a comeback ahead of the Bank of England’s (BoE) monetary policy decision, scheduled to be unveiled on February 8 by 12:00GMT for detailed insight into the bond market.

The yield on the benchmark 10-year gilts, slumped 4 basis points to 1.52 percent, the super-long 30-year bond yields plunged 3 basis points to 1.92 percent and the yield on the short-term 2-year traded nearly 3 basis points lower at 0.60 percent by 09:05GMT.

Following yesterday’s disappointing UK services PMIs, which signalled a slowing of economic activity at the start of the year, the BRC retail sales survey released overnight suggested that momentum on the high street was subdued but broadly stable at the start of the year, with total sales in January up 1.4 percent y/y and like-for-like sales up 0.6 percent y/y, both rates unchanged from December and close to their averages for 2017.

In light of falling real wages and subdued consumer sentiment, the figures might appear encouraging, however, spending on food, up 4.1 percent 3m/y, remained the main driver of total sales. High inflation in this category continues to stretch household budgets leaving less room for spending on less essential items. Indeed, non-food sales were down again, this time by 0.6 percent 3m/y.

Meanwhile, the FTSE 100 traded 1.17 percent lower at 7,219.00 by 09:10 GMT, while at 09:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bearish at -161.09 (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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