UK gilts plunge as investors await July core CPI, June unemployment data

The UK gilts plunged Monday on expectations of a slight rise in the region’s consumer price-led inflation index (CPI) for the month of July, scheduled to be released on August 15 by 8:30GMT.

The yield on the benchmark 10-year gilts, jumped 3-1/2 basis points to 1.09 percent, the super-long 30-year bond yields climbed nearly 3 basis points to 1.74 percent and the yield on the short-term 2-year traded nearly 2-1/2 basis points higher at 0.23 percent by 11:00 GMT.

It will be a busy week for UK data releases too, including July inflation (tomorrow), labour market (Wednesday) and retail sales (Thursday) figures. In June the headline CPI rate surprised on the downside falling for the first time in eight months, from 2.9 percent y/y to 2.6 percent y/y.

Employment growth is likely to have remained firm in June, while the unemployment rate looks set to have moved sideways, having fallen to a new forty-two-year low of 4.5 percent in May. But despite labour market tightness, headline pay growth will have almost certainly remained subdued, likely below 2.0 percent.

With regard to retail sector activity, the latest survey indicators brought mixed signals about the underlying strength of consumer spending. While consumer confidence took a turn for the worse, and new car sales continued to decline, retailers reported relatively firm results in July. So having recovered in Q2 after a notable decline at the start of the year, retail sales might well post a further modest increase.

Meanwhile, the FTSE 100 rose 0.64 percent to 7,356.75 by 11:10 GMT, while at 11:00GMT, the FxWirePro's Hourly Pound Strength Index remained slightly bullish at -92.21 (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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