Dollar a touch firmer

The dollar has firmed a little against the euro after Donald Trump said he would delay imposing tariffs on some goods imported from China (until mid-December this year from the initial date of 1st September), with the US currency trading under $1.12 this morning from a low of close to $1.1250 at one point yesterday.  Meanwhile, stronger than consensus UK labour market data has provided a mild fillip for the pound, which is hovering around 92.75p to the euro

Equity markets rallied on the back of Trump’s backtrack on tariffs, with the three main US indices closing between 1.5% and 2% higher yesterday, while US 10-year bond yields jumped by around 5bps to finish at 1.70%. However, weak economic data out of Germany and China overnight has seen yields reverse course while equity markets in Europe are opening softer this morning

A tight labour market in the UK – the unemployment is hovering below 4% – is putting upward pressures on wages  as the latest data show the annual rate of growth in average weekly earnings accelerating to 3.9% in the second quarter of the year, the fastest rate of growth since 2008

Stronger than consensus CPI inflation data released in the US has also supported the dollar. Core consumer prices (i.e. excluding food and energy prices) rose by a relatively large 0.3% in the month of July taking the annual rare of increase to 2.2% (up from 2.1% in June)

The German economy contracted slightly in the second quarter of this year – the second quarter of contraction in the past four – with GDP falling by 0.1% (q-o-q) as an increase in domestic demand was offset by a decline in exports

In China, the annual rate of growth in both industrial output and retail sales slowed in July, pointing to a further moderation in overall GDP growth at the start of the third quarter

Data due today includes Euro Area GDP and employment (both for Q2) as well as industrial production for July, while CPI inflation and house prices (for July and June respectively) are released in the UK