Dollar firmer as stocks steady
Equity markets were under pressure again yesterday though US stocks managed to rally into the close of business. Bond yields headed further south as stocks fell but they finished off their lows of the day. The dollar lost ground initially before recovering later in the session, albeit operating within narrow ranges. The euro are sterling are trading at around $1.08 and $1.29 respectively against the US currency this morning, both a touch weaker than yesterday morning, while EURGBP is little changed at around £0.8370. The release of Euro area inflation data will be a focus for markets this morning, though there’s likely to be some ‘treading of water’ ahead of the Trump tariff announcement tomorrow.
European stocks had another tough time of it yesterday, shedding 1.5%, though they have opened in positive territory this morning following the late recovery in US stocks. The latter saw the S&P 500 and the Dow Jones close up 0.5% and 1% respectively. Bond yields ended off their lows, with US and UK 10-year yields down slightly on the day and German yields broadly flat, but they are moving down again in this morning’s trading.
Ahead of Euro area inflation data this morning, inflation in Germany eased for a second consecutive month in March according to yesterday’s flash release, falling to 2.3% from 2.6% in February. Core inflation – excluding food and energy prices – looks to have fallen last month too, helped by another decline in services inflation.
According to a Bloomberg report yesterday, the ECB Governing Council is undecided about cutting interest rates again at this month’s meeting (April 17th), with the more dovish members of the Council willing to stay on hold if more time is needed “to assess data”. The market pared back expectations for a cut slightly following the report, though it still sees about a 70% chance of a 25bps reduction in the deposit rate.
Today’s Euro area inflation data are expected to show headline and core inflation eased to 2.2% and 2.5% in March (from 2.4% and 2.6% in February), according to the consensus forecast. Other data due include Euro area unemployment and job openings and the ISM manufacturing index in the US.