A little respite for the pound

Sterling has recovered a little ground against the euro at the start of this week, having fallen to fresh lows of over 93p at the end of last week, and against the dollar, having weakened to around $1.20, though this may well prove fleeting and the currency looks set to remain under pressure absent any positive developments on the Brexit front which doesn’t appear likely in the short-term. The euro, meanwhile, remains relatively stable against the dollar as it continues to trade in a very narrow range either side of the $1.12 level

Bonds in the core markets are rallying strongly, with yields falling sharply, as a “flight to safety” takes hold amid a myriad of worries for investors, including on-going trade tensions, street protests in Hong Kong, and concerns about a potential debt default in Argentina on foot of political changes that may come about there. US government 10-year bond yields have fallen to around 1.62%, down almost 15bps from last Friday’s close, while equivalent German government yields are setting fresh all time lows of -0.61%

Markets continue to see significant monetary policy easing by the major central banks, with almost three 25bps cuts in Fed interest rates priced in by the end of this year and the ECB widely expected to lower the deposit rate even further into negative territory (from the current -0.40%) at its  mid- September meeting

After a quiet day on the data front yesterday, there’s a fuller calendar today with the second quarter labour market report due in the UK and July CPI inflation in the US