Bond yields head higher

The euro was under pressure against the dollar during much of last week and kicks off this week trading just below $1.16. It was a case of a week of two halves for sterling which recovered ground against the US currency on Thursday and Friday and is nudging a little higher again this morning trading at around $1.3650. This in turn leaves the single currency-pound exchange rate hovering just below 85p

There was a notable jump in government bond yields last week with US and UK 10-year yields rising by the best part of 15bps to around 1.60% and 1.15% respectively, while equivalent German 10-year yields were almost 10bps higher at -0.15%.  UK yields in particular have nudged up further this morning, by around 5bps to 1.20%

Bank of England Governor Andrew Bailey has warned that inflation in the UK is likely to increase further and says the central bank  has a “very delicate and challenging job” when it comes to managing its longer-term impact on the economy.

Employment in the US rose by 194,000 in September according to Friday’s payrolls report, which was a good bit less than the consensus forecast for an increase of circa 500k, though the unemployment rate still fell further last month to stand at 4.8% (from 5.2% in August)

Data due this week include the latest labour market report and GDP in the UK on Tuesday and Wednesday respectively, and CPI inflation and retail sales in the US on Wednesday and Friday respectively