Dollar a little firmer

The dollar gained a little ground against the euro last week as the Fed raised interest rates by 25bps, indicated another hike is likely over the remainder of this year,  and set out a plan for reducing the size of its balance sheet, something which Fed Chair Yellen says could get underway relatively soon

US bond yields ended the week lower notwithstanding the Fed rate hike with 10-year yields falling by around 5bps to circa 2.15%.  Equivalent German yields rose marginally (by 2bps to 0.28%), while there was a jump in UK yields, which increased by around 10bps after the MPC vote

Sterling regained some ground over the latter part of last week as the Bank of England’s MPC voted 5-3 to keep interest rates on hold at 0.25%, a much closer call than the market expected  with the three dissenters voting for an immediate 25bps increase.

The UK currency is trading at around 87.5p against the euro this morning ahead of  the Brexit negotiations which finally get underway later today and  is likely to prove volatile as the negotiations proceed

Data due this week include flash PMIs for the Euro area on Friday. The composite PMI has risen steadily recently consistent with relatively strong growth in the zone