Janet Yellen raised US interest rates last night, for the first time in a decade, by 25bps to 0.5%. Though the market got what it had demanded, Yellen was cautious not to stoke volatility stating “the recovery has come a long way but is not yet complete...even after this increase the Federal Reserve is likely to proceed gradually”.

The fact that the Fed had “telegraphed” the rate rise for so long meant that there was a smooth start to the “lift off” and the US Dollar open price versus Sterling had gained only 50 pips on yesterday’s close.

Elsewhere, the economic calendar is pretty quiet from a European standpoint today. The only notable data release is UK retail sales which is expected to see a slight annualised decline to 3.0% from 3.8%. The core figure, excluding fuel is also estimated to drop. This could spell bad news for Sterling as the likeliness of a Bank of England rate hike is decreasing on account of a slowdown in the wage growth, the threat of job losses in mining and energy sector, and a worsening current account.

Eurozone had some promising data yesterday as manufacturing PMI came in higher than expected with a reading of 53.1 from 52.8 in December. Inflation was also revised up from 0.1% to 0.2%.

Data to watch: 9.30am UK Retail Sales Nov (year-on-year, month-on-month & Excl Fuel). 2.30pm US Philly Fed Manufacturing. 3pm US CB Leading Indicator.