Fundamental wrap: GBP/USD's rally to YTD highs a potential head fake

From a fundamental perspective of Thursday's markets, the curve has been the main theme while the reflation trade stumbles, supporting a higher dollar on the day while stocks fell, (tech stocks, homebuilders were in decline).

As analysts at ANZ noted, "the US treasury curve bear steepened, with 2 year largely unchanged and 10 year up 4bps to 2.91%. European yields were also sharply higher while in the UK the 10-year yield climbed 10bps to 1.52%."

A head turner today was the pound and a dovish Carney. We have had a series of poor data of late for the pound and todays retail sales miss was no exception to the tend. This is causing the market to rethink its presumption over UK rate hikes from the BoE and making the recent spike to 1.4376, clearing the 24th Jan highs look more like a head fake. To add to the troubled picture for the pound,  the EU is said to have rejected the UK Irish border solution.

Key headlines for Thursday: (Sources: Livesquawk, FT)

• Trump said to tell associates he does not need to remove Mueller
• Rosenstein said to tell Trump he is not the target of Mueller probe
• EU said to reject UK Irish border solution - Telegraph
• Germany Scholz: we spoke about trade in talks with US VP Pence
• BoJ Kuroda: do not expect protectionism to spread around the world
• BoJ Kuroda: protectionism is not a drag on Japan economy for now
• BoJ Kuroda: protectionism is not good for world economy
• US, European treasuries slide, us 10 yr hits 2.934pct highs
• IMF's Lagarde: unilateral trade barriers are 'not very effective'
• Fed's Brainard: warns of growing pro-cyclical presssures, rising asset prices
• Fed's Quarles: crapo bill won't change Fed approach to foreign banks
• Nafta leaders said to agree on telecom chapter
• BoE's Carney: Brexit uncertainty could delay interest rate rise
• BoE's Cunliffe: worried trade tension will spill over to other areas
• Boe's woods: sees clearing relocation hurting EU clearing customers
• Boe's brazier: BoE mortgage limits reduce economic risks
• Italy's 5-star sees chance of government deal with the league
• New Italy forecasts to raise 2018 GDP growth to 1.6 pct
• German Finmin Scholz: EU banking union must first focus on risk reduction