Dollar drifting lower

The dollar continues to drift very slowly lower against the euro and is trading at around $1.1150 this morning, which compares to a high of around $1.1080 towards the end of last week. The pound also continues to lose ground against the euro – it is now knocking on the door of 86p  – and the dollar – falling further below the $1.30 level – as GDP data in the UK yesterday reinforced market expectations for a near-term cut in interest rates

Bond yields in the main markets continue to move higher. This is being led by German yields, which in the 10-year maturity area have risen by more than 10bps, to around -0.15%, over the past week or so, while equivalent US yields are up around 5bps, to 1.85%, over the same period. The UK is an exception, with interest rate cut-expectations contributing to a decline in yields over the past few trading sessions

The UK economy contracted by 0.3% in November (from October) according to yesterday’s GDP data, and while the latter can be volatile on a monthly basis, the underlying trend was one of only very modest economic growth (of 0.1%) over the three months to November (when compared to the three months to August)

Fed member Bostic says the US economy is “doing fine” and the central bank should be ready to move interest rates in either direction as appropriate

Data due today includes CPI inflation and small business optimism in the US