UK Data Strikes Out Again | US Treasury Revives 20-Year Bond
Published January 17, 2020
If anyone had any doubts about the state of the UK economy, this week’s trifecta of data misses likely put the argument to rest. The verdict; the UK is in trouble. This morning’s retail sales data missed by a mile, with the monthly December reading showing a 0.6% decline against an expected 0.7% increase. Markets were already expecting the Bank of England to step up after this week’s big misses on inflation and GDP, and this morning’s data could finally push them into action. All eyes are on the next Bank of England policy meeting on January 30 with markets now pricing in a 73% chance of a 25 basis-point cut. The pound plunged on the initial retail sales reaction but is holding firm at 1.3050 heading into the New York open.
The US Treasury announced they will issue 20-year bonds in the first half of the year as it looks for new outlets to fund the massive US deficit. The US hasn’t issued a 20-year bond in over 30 years, and its revival shows that the swelling deficit is going to require a lot of finessing in order to keep the country afloat. The US yield curve has steepened on the news as investors sell off longer-term bonds, and the US dollar strengthened slightly against other majors.
The euro is selling off this morning sparked by a stronger dollar and renewed EU-US trade headlines in the news. The European Commissioner for Trade, Phil Hogan, spoke to reporters in Washington and suggested US President is “obsessed” with the trade deficit. Hogan went on to suggest that the US-China deal may be in violation of international commerce rules, and the rhetoric isn’t going over well with Euro Traders this morning.