Pound strengthens ahead of UK retail sales figures – business live

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Stock markets continue to recover some of the ground lost during the early February rout, despite further signs yesterday of rising inflation, one of the key factors behind the slump. The concerns about price increases led to a jump in bond yields, and there seems little sign of that ending. So, as Michael Hewson, chief market analyst at CMC Markets UK, put it:

With Wall Street up 306 points or 1.2% and the Nikkei 225 climbing 1% overnight, European markets are expected to continue the trend:

(@IGSquawk)

The UK market’s positivity comes despite a rise in the pound, which usually puts the dampeners on the FTSE 100’s overseas earners.

Sterling – which is benefiting from the weaker dollar as well as renewed optimism about the outcome of the Brexit talks – is currently up 0.27% to $1.4135 and could go higher if today’s UK retail sales figures live up to expectations. The month on month figure for January is expected to rise to 0.6% after December’s 1.5% decline. The year on year number is forecast to rise from 1.3% to 2.4%. CMC’s Hewson again:

The UK had a pretty rotten month in December, with a slump of 1.5%, though that was largely as a result of bumper November number of 1.1% which had been boosted by Black Friday sales spending.

Recent retail sales numbers from the British Retail Consortium and KPMG earlier this month appeared to show that while some retailers were struggling we did see a pickup in January, as consumers started to re-open their wallets after a slow December. The recent cold weather in January may well have also prompted an increase in demand for coats and gloves, with an expectation that we could see a rise of 0.6%.

Jasper Lawler at London Capital Group said:

The pound wasted little time capitalising on the weaker dollar and continued to charge higher passing $1.41 overnight. Investors will now turn their attention towards UK retail sales due this morning at 09:30 GMT. Analysts are expecting retail sales to have increased 2.4% year on year in January, up from 1.3% in December. Given the hawkish tone from the Bank of England earlier this month, in addition to the higher than forecast CPI data, a higher reading in retail sales could see the pound target its previous high of $1.4375.

The agenda:

9.30 GMT: UK retail sales

13.00 GMT: US housing starts

We’ll be following all the developments during the day.