The UK 10-year gilt yield fell to 4.4% as market concerns over a potential US-Europe trade escalation eased and investors digested stronger-than-expected public borrowing data. US President Donald Trump said he would hold off on imposing tariffs on goods from European countries opposing his plan to take control of Greenland, adding that a “framework for a future deal” had been agreed following talks with NATO, though details remain unclear. On the domestic front, the UK public sector budget deficit narrowed to £11.6 billion in December, below market expectations of £13 billion. Earlier this week, ONS data showed headline CPI inflation rose to 3.4%, slightly above forecasts of 3.3%, while services inflation, a key gauge of domestic price pressures watched by the Bank of England, edged up to 4.5% from 4.4%, a smaller-than-expected increase. The unemployment rate remained at a pandemic-era high of 5.1%, while wage growth slowed to 4.5%, its weakest pace since April 2022.
