UK yields remain highest in G10 as Retail Sales expected to show spending stall
The week was very quiet in terms of notable macroeconomic releases or monetary policy news, and sterling reflected that in torpid summer trading. There was more interesting market action in the gilt market, where long-dated rates continue to rise relentlessly.
This is of course a general trend in sovereign debt markets, but British yields remain the highest in the G10.
Labour's inability to control spending amid persistent unpleasant surprises in the inflation numbers certainly do not help. Markets are currently pricing in less than a 50% chance of even a single rate cut this year from the Bank of England, but the steady rise in medium and long term rates threaten to render policy moves less effective regardless.
The focus in the UK this week will likely be on Friday’s retail sales figures for July, which are expected to show that consumer spending stalled at the start of the third quarter of the year.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
