Dollar firmer after Fed minutes

The dollar is firmer and US bond yields are higher after the release of the minutes of the Fed’s recent monetary policy meeting. The former has strengthened to under $1.15 against the euro and to under $1.31 against sterling, while US 10-year yields closed around 6bps higher yesterday at over 3.2%.

The Fed minutes noted that, in the context of a continuing gradual rise in US interest rates, the stance of monetary policy would need to become “modestly restrictive for a time”, or in other words that interest rates would need to temporarily rise about their so-called neutral level, which the Fed estimates to be around 3%  (rates currently stand in a range of 2% to 2.25%)

Sterling continues to trade just below the 88p level against the euro, as EU leaders call on Michel Barnier to continue his efforts to reach an agreement on Brexit.  While they say sufficient progress has not been made to date, they are ready to convene a summit meeting if and when “decisive” progress is reported. The EU’s informal proposal to extend the transition period, which Theresa May is said to be “open to”, is likely to be the focus of the negotiations over the coming weeks

The annual rate of CPI inflation in the UK eased to 2.4% in September from 2.7% in August, according to the latest data, and the core rate nudged down to 1.9% from 2.1%. The Bank of England expects inflation to ease further in the period ahead and to settle in around the target of 2%, though it has said a further limited increase in interest rates will be necessary to bring this about

Data due today include retail sales in the UK and jobless claims in the US