The yield on the UK's 10-year gilt surged to 4.5%, marking its highest point since January 5. This increase comes as traders adjusted their expectations regarding potential rate cuts from the Bank of England. Their recalibration was influenced by recent statements from policymaker Megan Greene as well as stronger economic data than anticipated. Greene highlighted that a central bank survey indicates wage growth may have stabilized, expressing diminished concern about the deceleration in disinflation, while suggesting that a more relaxed US monetary policy might contribute to higher UK inflation.
Further buoying the gilt rally, the S&P Global PMI data revealed that UK private sector activity in January expanded at the most rapid rate since April 2024. Additionally, retail sales experienced a 0.4% increase in December, surpassing forecasts. Consumer confidence also reached its highest level since August 2024. This follows earlier findings that the headline Consumer Price Index for December was hotter than expected at 3.4%.
Meanwhile, on the international front, tensions between the US and Europe have temporarily eased. This follows President Donald Trump's announcement that he would hold off on imposing tariffs on European goods, which opposed his proposal regarding Greenland.
