Dollar a touch weaker

The dollar has slipped a little, as equity markets continue to advance, to trade just under $1.13 and just below $1.25 against the euro and sterling respectively, leaving the single currency-pound rate at about 90p, though in truth the trading ranges for the main currency pairs have been relatively narrow this week. Core bond yields continue to nudge higher, with German 10-year yields up almost 10bps this week so far to -0.40%

In the minutes of the Fed’s most recent meeting, published yesterday, members “judged that the effects of the coronavirus outbreak and the on-going public health crisis will weigh heavily on economic activity, employment, and inflation in the near-term and would pose considerable risks to the economic outlook over the medium term”, noting that the “second quarter would likely show the largest decline in economic activity in post–World War II history”. Accordingly, members “reaffirmed that the Federal Reserve was committed to using its full range of tools to support the U.S. economy in this challenging time”

ECB member Panetta says “the coronavirus (COVID-19) shock creates a uniquely high degree of uncertainty about the economic outlook….we lack clarity about when the virus will be tamed and when social distancing measures can be relaxed…(and) about the effects of the lockdown on confidence and growth”

The ISM index of manufacturing activity in the US rose again in June to stand at 52.6 – above the expansion-contraction threshold of 50 – suggesting output in this sector of the economy is now increasing although, following falls in March and April, it is still likely to be running a good bit below its pre COVID-19 level

In the UK, the Purchasing Managers Index (PMI) of manufacturing increased for a second consecutive month in June and at 50.1 suggests output is steady to increasing marginally. The equivalent index of manufacturing activity in the Euro also rose for a second month running last month to 47.4

Data due today includes the unemployment rate in the Euro Area and weekly jobless claims and the June employment report in the US