Bond yields drift higher

The euro continues to trade under $1.09 against the dollar and is still hovering in and around 87p against sterling, while the pound remains below $1.25 against the US currency.

Government bond yields are drifting higher, with US 10-year yields approaching 3.55% and equivalent German and UK yields up to 2.35% and 3.80% respectively.

ECB’s Holzman says “if my wish were to come true, we would be moving toward a terminal (deposit) rate somewhere above 4% (the deposit rate is currently 3.25%),  adding that he “would have preferred a speedier (rate) increase at the last meeting, so staying at 50 basis points”.

Retail sales in the US rose slightly in April (from March), increasing by 0.4% in nominal terms, though they were still running below their average level in the first quarter of the year, while manufacturing output rose by 1% last month, reversing March’s fall of 0.8%).

In China, retail sales rose by almost 19% year-on-year in April as the economy benefited from the lifting of COVID-19 restrictions.

Economic data due today include a final reading for Euro area CPI inflation in April – the flash reading showed the headline rate at 7% – and housing starts/building permits in the US.