Bond yields fall further

The dollar was under pressure for a time yesterday after the release of some softer than expected economic data in the US, but it has recovered ground since to trade at around $1.0840 to the euro and $1.2380 to sterling this morning. This in turn leaves EUR/£ at around 87.4p as it continues to trade in a tight range, with weaker than forecast retail sales in the UK released a short while ago having little enough impact on the pound.

In government bond markets, UK 10-yields are lower post the retail sales data and are now down around 25bps week so far this week, while equivalent US and German yields also ended lower yesterday and are down around 20bps and 15bps respectively week to date. Meanwhile, in equity markets. European stocks closed in the red for the first time this week, while US indices finished broadly flat.

Oil prices fell yesterday with Brent crude dropping by more than 4% to around $77.5 per barrel. This extends the decline in place over the past couple of months and will put downward pressure on headline inflation rates, as well as giving OPEC+ food for thought ahead of its meeting at the end of this month.

Consumer spending in the UK began the fourth quarter on a soft note judging by this morning’s retail sales data for October, with volumes falling by 0.3% from September (the consensus had expected an increase of 0.4%) after declining in the third quarter as well.

It is relatively economic data-wise for the rest of the day, with a final reading of October CPI inflation in the Euro area (the flash reading showed headline inflation fell sharply to 2.9% last month from 0ver 5% in September) and housing starts in the US the main releases of note. There are also a number of ECB and Fed members scheduled to speak.