Dollar firmer again

US bond yields rose further yesterday, with 10-year yields climbing to almost 3.10% at one point before ending the day at 3.07%, their highest level since 2011. With the US economy growing at a solid pace, inflation in line with its target, and the labour market operating at full-employment, the Fed is almost certain to raise interest rates further, which will keep the upward pressure on bond yields

Higher US bond yields continue to support the dollar, which yesterday strengthened to a fresh high of just over $1.18 against the euro and rose to over Y110 against the Japanese yen. It also gained ground against sterling, rising to around $1.3450 before easing back to $1.35. Meanwhile, sterling continues to trade just below 88p against the euro

Employment in the UK rose by 197,000 in the first quarter of this year from the final quarter of 2017, according to the latest labour market report, the strongest pace of jobs growth since the end of 2015, while the unemployment rate dipped to 4.2% from 4.4% in 2017 and annual  earnings (ex bonuses) growth picked up to 2.9% from 2.5%. If GDP growth rebounds from what the Bank of England described as a soft patch in the first quarter, then with the labour market performing well an increase in interest rates this year will be on the cards

Retail sales in the US rose for a second consecutive month in April, having been flat to down in January-February , which points to a reacceleration in overall consumer spending growth in Q2 after a relatively subdued first quarter of the year

Data due today include a second and final estimate of Euro area CPI inflation in April as well as housing starts and industrial production in the US