UK gilts tad lower on caution ahead of BoE Governor Carney’s speech, January manufacturing PMI

The UK gilts traded a tad lower Monday as investors maintained caution in a muted European session ahead of the Bank of England Governor Mark Carney’s speech and the country’s manufacturing PMI for the month of January, scheduled to be disclosed on January 30 and February 1 by 15:30GMT and 09:30GMT respectively.

The yield on the benchmark 10-year gilts, rose 1 basis point to 1.45 percent, the super-long 30-year bond yields hovered around 1.90 percent and the yield on the short-term 2-year traded 1/2 basis point higher at 0.63 percent by 09:00GMT.

Brexit and Conservative Party dysfunction are set to dominate in the UK this week, with EU Ministers today set to adopt directives providing the European Commission with a negotiating mandate for the imminent talks on the nature and length of the transition period. These will insist that EU law will continue to apply directly in the UK until end-2020 while also removing any UK influence from the setting of any new rules over the period of the transition – just the kind of thing to make the Tory Brexiteers apoplectic. Expect talk of a challenge to Theresa May’s leadership to persist.

It’s a much quieter week for UK data ahead. The main event will be the first glimpse of whether activity in the manufacturing sector continues to outperform from the PMI survey on Thursday. Before then, tomorrow’s Bank of England lending figures will confirm if growth in consumer credit moderated in December, after the BoE’s Q3 Credit Conditions Survey suggested the appetite for borrowing on unsecured loans and credit cards may be waning. Wednesday will provide a steer on how fragile consumer sentiment is, with the release of the GfK confidence survey. The BRC Shop Prices Monitor will be published the same day and should indicate that high street inflation has now peaked. The recent strengthening of sterling also supports our view that the wider measure of CPI inflation is set to slow in coming months. Beyond the data, tomorrow Mark Carney will be testifying before the House of Lords Economic Affairs Committee.

Meanwhile, the FTSE 100 traded 0.15 percent higher at 7,677.75 by 09:10 GMT, while at 09:00GMT, the FxWirePro's Hourly Pound Strength Index remained slightly bearish at -86.31 (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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