Dollar a little softer

The main currency pairs are not much changed this morning. The euro and sterling are both a touch firmer against the dollar – trading at around $1.0860 and $1.2650 respectively – with the latter failing to benefit from the recent paring back of Fed rate cut expectations and the associated increase in US bond yields. The euro-sterling cross continues to trade just below 86p.

Sovereign bond yields edged higher yesterday, extending last week’s increase, with 10-year yields up 2-4bps on the day. In equity markets, European stocks added around half a percent while US indices closed broadly flat following Friday’s gains.

In Germany, industrial production posted another solid gain in February, increasing by 2.1% month-on-month after increasing by almost 1.5% in January. Despite this though, output was still a sizeable 4.9 % lower than in the same month in 2023.

Retail sales in the UK picked up in March according to the British Retail Consortium’s latest survey, albeit helped by Easter falling unusually early this year, with (like-for-like) year-on-year growth rising to over 3% last month from 1% in February.

Fed member Goolsbee says the central bank has to pay attention to “how long” it keeps interest rates high, noting that keeping monetary policy too restrictive for too long could start to push up the unemployment rate.

It’s quiet on the economic data front today. The small business optimism index is scheduled in the US, while the ECB publishes the results of its latest bank lending survey.