Bond yields higher

The main currency pairs continued to trade in very narrow ranges on Friday, as had been the case over the course of last week, with the euro closing out the day still hovering around the $1.10 level against the dollar and around the 85p area against the pound, and the latter finishing the week where it started at about $1.29 (as the latest opinion polls show the Conservatives with a still healthy lead over Labour)

Bond yields in the core markets, which were largely unchanged last week, have spiked higher at the start of this week following the release of better than expected data out of China, with benchmark US 10-year yields up around 6bps to 1.84%  (their highest level since the middle of last month) and equivalent German yields up around the same to -0.31%

The manufacturing PMI for China rose above the expansion-contraction of 50 in November (albeit just about, to 50.2)) for the first time since  April of this year, while the services PMI rose to 54.4, its highest level since April as well

In Germany, the SPD – the joint-ruling government party –  has elected a new left-leaning leadership, which is being seen as a potential threat to the survival of the ‘grand coalition’, so something to keep an eye on moving forward

It is quite a busy week ahead for economic data with manufacturing and services PMIs in the Euro Area, UK and US scheduled for today and Wednesday respectively, and the latest (November) employment report in the US out on Friday. On the central bank front, ECB President Christine Lagarde testifies at the European Parliament today