UK gilts trend lower on expectations of upbeat January consumer inflation, labor market in focus

The UK gilts continued to trend lower at the start of the week, following expectations of upbeat consumer price inflation (CPI) data during the month of January, scheduled to be released on February 14.

The yield on the benchmark 10-year gilts, which moves inversely to its price, jumped 2-1/2 basis points to 1.28 percent, the super-long 30-year bond yields also surged 2-1/2 basis points to 1.97 percent and the yield on the short-term 2-year too edged higher by 2-1/2 basis points to 0.11 percent by 09:20 GMT.

The U.K. inflation is likely to be on the rise with a slight likelihood of regaining target. According to a Societe Generale research report, there is possibility of a major upward influence on the January inflation data from petrol prices that increased 2.8 percent sequentially in reaction to the 17 percent rise in the sterling price of oil in December.

UK’s manufacturing output jumped 2.1 percent m/m in December compared to a revised 1.4 percent rise seen in Nov, while total industrial output also showed a stellar performance on monthly basis, with the figures showing a 1.1 percent growth in the reported month, against +0.2 percent expected and a 2.0 percent rebound seen in November.

Further, UK’s trade deficit narrowed in the fourth quarter as exports to countries outside the European Union rose. The deficit shrank to GBP8.6 billion from October to December, a GBP5.6 billion drop from the third quarter.

Meanwhile, the FTSE 100 fell 0.02 percent to 7,258.50 by 09:40 GMT, while at 09:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bullish at 81.20 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex