Although the market’s focus tomorrow will be on US retail sales, the British pound will also be in play with employment numbers and the Quarterly Inflation Report due for release.
Producer prices grew by the fastest pace in 16 years but the growth of consumer prices fell short of expectations in the month of January. In fact, CPI dropped 0.7 percent, which was the sharpest plunge in a year – though the annual rate edged up to 2.2 percent. What does this mean for the outlook for UK interest rates? It is murkier than ever. For this reason, tomorrow’s reports will be exceptionally important. It will be interesting to see if the Bank of England is still worried about inflationary pressures in their Quarterly Inflation Report. Employment could also weaken, with the labor market components of manufacturing and construction sector PMI declining sharply in the month of January.