Bond yields rising

As US bond yields rise to new cycle highs, the dollar is drifting up and trades at around $1.0880 and $1.2730 against the euro and sterling respectively this morning, which in turn leaves the single currency a touch lower against the pound trading just under 85.5p.

In government bond markets, US 10-year yields have risen to almost 4.30%, a new high since the Fed starting raising interest rates back in March last year. Equivalent German and UK yields are rising in tandem and are now up to 2.69% and 4.68% respectively.

The minutes of the Fed’s July meeting, at which it raised rates by 25bps, note that “with inflation still well above (target) and the labor market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy”.

ECB Kazaks says, “on interest rates, the big rise is behind us,” adding that “if we look at the coming months, if there’ll be increases in interest rates then they’ll be really very small.”

The Euro area economy grew by 0.3% quarter-on-quarter in Q2 according to the second estimate published yesterday (which confirmed the initial estimate), while employment in the zone rose further in the quarter though the pace of growth slowed to 0.2% (from 0.5% in Q1).

The annual rate of residential property price inflation in Ireland eased again in June, dipping to 2.2% from 2.6% in May according to the CSO.

It is relatively quiet on the economic data today with the trade balance for the Euro area and jobless claims and the Philly Fed index in the US scheduled for release.