Bond yields nudge up

The euro is steady against the dollar this morning, trading just below the $1.11 level (and so still off its early August lows of just over $1.10), ahead of a potential vote of no confidence in the Italian Prime Minister later today.  The single currency is also largely unchanged against sterling, trading at around 91.5p, having lost ground during the course of last week, while the pound remains at $1.21 against the dollar

Bond yields nudged higher yesterday, after creeping up on Friday as well, amid reports that the German government might be planning a fiscal stimulus to support its beleaguered economy (which would certainly be welcome if it were to materialise and would take some of the burden off the ECB). German 10-year yields have risen by almost 10bps over the past couple of trading sessions, though of course they remain deep in negative territory at -0.65%

The UK Prime Minister is not for turning, reiterating in a letter to the President of the European Council, Donald Tusk, that the “backstop” is (among other things) “anti-democratic and inconsistent with the sovereignty of the UK as a state”, while adding that efforts must be made to find “other solutions” and to reach an agreement

The annual rate of headline inflation in the Euro Area came in at 1% in July according to the final reading published yesterday, down from 1.3% in June and a recent peak of 2.3% in October 2018, and just above the core (or underlying) rate of 0.9%, both well shy of the ECB’s target

The Italian PM is expected to lose a vote of no confidence if held in parliament today, which will then see the various parties scramble to form an alternative government.  While the country’s bond yields have fallen recently, the spread over German yields has widened out again as political tensions have resurfaced

Data due today includes construction output in the Euro Area and the CBI’s latest industrial trends survey in the UK