Calm enough in FX

It’s relatively calm in FX markets with not much change in the main currency pairs. Sterling has retreated a little further from its highs of the week (and of the year) against the dollar to trade at around $1.3220, having dipped below the $1.32 level yesterday, while the euro is also a touch lower against the US currency at around $1.1130.  This in turn leaves EURGBP largely unchanged, trading at around £0.8420 this morning.

It was quiet in government bond markets with yields ending flat to marginally lower on the day (they have been relatively steady lately following their sharp move lower from late July to early August). In equity markets, European stocks nudged higher again, chalking up modest gains, while US indices ended lower led by a 1% decline in the Nasdaq.

The latest credit data from the ECB shows lending to households and businesses in the Euro area remains subdued, the result of the higher borrowing costs. Lending to households rose by 0.5% in the year to July, up slightly from 0.3% in the year to June, while the annual growth in lending to non-financial corporations (NFCs) slipped to 0.6% last month from 0.7% in June.

Ahead of Euro area inflation data tomorrow, the annual rate of (EU-harmonised) inflation in Spain slowed quite sharply in August according to the flash reading published earlier this morning, falling to 2.4% from 2.9% in July. The consensus forecast for tomorrow’s Euro area data is for a decline in headline inflation to 2.2% this month from 2.6% in July, while core inflation is seen dipping to 2.8% from 2.9%.

For the day ahead, flash inflation readings for August are published in Germany and Ireland, while the Euro area Economic Sentiment Indicator (ESI) is also due. US data scheduled include another estimate of GDP growth in Q2 – the previous estimate showed growth picked up to 0.7% from 0.4% in the first quarter – as well as weekly jobless claims and pending home sales.