Dollar creeping higher
While stocks chalked up solid gains again yesterday, it was relatively uneventful in bond and FX markets. The dollar continues to creep higher and has now more or less retraced all of the decline that occurred in the latter part of last week. EURUSD is trading at around $1.1630 this morning, down about a cent from last Thursday’s highs, while GBPUSD is also down around a cent from last week’s best levels trading at circa $1.3385. This in turn leaves EURGBP little changed hovering just below the £0.87 level.
Stocks have more than fully recovered from their mini (and short-lived) wobble towards the end of last week. European equities rallied by around 1.5% yesterday, with the Euro Stoxx 50 closing at a new high for the year, while the main US indices added a bit more than 1%. In government bond markets, 10-year yields nudged down by 2-3bps, dipping back below the 4% level in the case of US yields. They are edging lower again this morning, with UK bonds outperforming a touch on the back of slightly better than expected UK government borrowing data released a short while ago.
According to this morning’s UK data, public sector net borrowing (PSNB) – the difference between total public sector spending and revenue – came in at £20.2 billion in September, slightly less than the consensus forecast (£20.8bn) but £1.6 billion – or 8.6% – higher than in September 2024. For the first six months (April-September) of the current financial year (FY), PSNB was £99.8 billion, £11.5 billion (or 13.1%) more than in the same six-month period of 2024 and just over £7 billion (or 7.8%) ahead of the OBR’s March forecast for borrowing at this stage of the FY.
ECB member Nagel says Euro area “inflation is close to our (2%) target” – the latest data show the headline rate running at 2.2% in September – which allows the central bank to keep interest rates on hold and remain in a “wait-and- see” mode.
It is extremely quiet in terms of economic data for the rest of the day with little or nothing of note due. There are a few ECB members scheduled to speak during the course of the day.