Bond yields lower

The dollar edged higher for a time during Monday’s session as stocks weakened and bond yields fell,  but the main currency pairs are little changed this morning from where they were trading early yesterday with the euro and sterling at $1.0940 and $1.2610 against the US currency respectively and EUR/£ at 86.7p.

Both US and European stocks closed lower yesterday albeit only marginally so, while government 10-year bond yields fell by the best part of 10bps on the day (more than reversing last week’s increase in the case of German and US bonds).

ECB’s Lagarde notes that “despite the slowdown in (economic) activity, the labour market remains resilient overall, although there are some signs that job growth may lose momentum toward the end of the year.” Slower employment growth would help to moderate wage inflation, which the ECB wants to see to be more confident that consumer price inflation will return to its 2% target.

Higher mortgage rates in the US are weighing on the housing market with new home sales falling for a second month in three in October, declining by almost 6% from September.

Economic data due today include money supply and credit growth in the Euro area and consumer confidence and house prices in the US