A bounce in sterling!

Sterling bounced by around a penny against the euro yesterday to trade at 90.5p and by about a cent against the dollar to over $1.22, which compares to 93p and $1.20 respectively just a short two weeks ago.  What’s going on? Boris’s trip to Berlin and Paris this week means he is at least now talking to (rather than at) ‘the EU’, while both Merkel and Macron said there’s still a chance of a Brexit deal by October 31st, albeit the latter was clear that any deal won’t be much different from the one that was negotiated over the last two years. Sterling has latched on to these crumbs of comfort for now, though it will take more than this to prompt further gains

Core bond yields nudged higher again, despite a mixed bag of economic data, with US 10-year yields now trading close to 1.65% (compared to around 1.55% earlier in the week), while equivalent German yields stand at -0.65% (having set new all time lows of -0.72% at the end of last week)

The Euro Area composite PMI rose slightly in August (to 51.8) but it still signalling continuing modest economic growth, while the equivalent index for the US slipped this month (to 50.9) suggesting the pace of growth is easing

The Fed seems split on whether interest rates should be lowered again next month, with two officials (Harker and George) arguing for no change on the basis that the economy is doing okay,  while a third (Kaplan) said it may be appropriate to cut again to provide further insurance against downside risks to the outlook

The Chair of the Fed, Powell, gives a keynote speech to the Jackson Hole symposium today, while on the data front the only release of note is new home sales in the US