Consumer Confidence: Sunny Side Up
UK CONSUMER CONFIDENCE
The GfK measure of UK consumer confidence for March released earlier this morning increased to -16 from -23, its highest level since last March. That reflected more positive sentiment about both consumers’ ow n finances and the general economic situation prompted by the rollout of the Covid-19 vaccine. The latter component is still w ell below its pre-pandemic level but can be expected to continue to move up as lockdown restrictions are eased further. Just released UK public finances data for February show ed monthly net borrowing of £18.4bn. That was slightly below forecasts but still almost £18bn higher than for the same month a year ago before the impact of the pandemic started to be felt. In the Budget earlier this month, it w as forecast that the full-year deficit for 2020/21 would reach a peacetime record of £355bn (or 16.9% of GDP). That would be a sixfold increase on the borrowing total for the previous financial year and around £300bn higher than the Office for Budget Responsibility’s pre-pandemic forecast. The rest of today’s data calendar is extremely light with nothing of note in the UK, Eurozone or the US. In Canada, retail sales data for January will be watched for signs that domestic economic conditions are improving. European Central Bank policymaker Panetta is scheduled to speak today and there w ill be particular interest in whether he has more to say about increases in government bond yields. ECB policymakers in contrast to their counterparts at the US Federal Reserve and the Bank of England have been much more w illing to say that the market move is unw arranted. BoE Deputy Governor Cunliffe will also speak but it doesn’t look as though his remarks w ill cover near-term economic and market developments.
UK and US government bond markets both sold off further yesterday as concerns about a potential rise in inflation and a future tightening in monetary policy continued to mount. It seems that attempts by the US and UK central banks to provide reassurance this w eek have so far proved ineffective. US Treasuries have rallied modestly overnight after 10-year yields posted a new 12-month high yesterday. Most major currency pairs are little changed.
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