Bond yields moving up again

The euro nudged higher against the dollar over the latter part of last week, gaining around a cent to over $1.13, which is its best level in 3 weeks but still well within the range  of $1.12 to $1.15 that has prevailed in 2019 to date. Sterling had a mixed week, drifting lower to well over 86p against the euro but firming to around $1.31 against the dollar, as the EU granted an extension to Article 50, Parliament went into recess for a couple of weeks, and talks on a possible Tory-Labour deal on Brexit continued in the background

There was a notable enough rise in bond yields in the core markets last week, much of it coming on Friday as better than expected data out of China added to some tentative evidence the economic activity globally may be stabilising. US 10-year yields closed about 10bps off their intra-week lows at over 2.55%, while equivalent UK and German yields were about 8bps and 11bps higher at 1.21% and 0.05% respectively

On the central bank front, the ECB  stayed on hold at last Wednesday’s meeting but indicated it is able and willing to ease policy again if necessary, while the minutes of the Fed’s most recent meeting showed a majority of officials see interest rates unchanged for the remainder of this year. As regards the Bank of England, to the extent that the extension to Article 50 prolongs uncertainty, it is likely to continue sitting on its hands as far as rates are concerned

It is a busy enough week for economic data, with flash PMIs for April due in the Euro area this Thursday, while in the UK latest labour market report and CPI inflation reading are scheduled for Tuesday and Wednesday respectively. Of interest too will be first quarter GDP data for China which are published tomorrow (Tuesday)