Dollar gives up gains

The euro and sterling both lost some ground against the dollar for a time yesterday, following the release of firmer than expected economic data in the US, but they have since recovered to trade back above $1.09 and just north of $1.25 respectively this morning, which in turn sees EUR/£ largely unchanged at 87.2p.

In fixed-income markets, US and German government 10-year bonds yields ended broadly flat yesterday, having headed south for  period, while equivalent UK yields closed 5bps higher on the day. Equities, meanwhile, had a positive session with US and European stocks adding 0.5%.

The Chancellor of the Exchequer’s Autumn Statement contained few surprises relative to what had been leaked in advance, with cuts to personal taxes and business taxes announced. The Office for Budget responsibility has raised its forecast for GDP growth in the UK this year to 0.6% from -0.2% in its last set of projections in March, while lowering 2024 to 0.7% from 1.8%.

German and French PMI data released this morning suggest their economies may have contracted in the final quarter of the year, with the composite index remaining below the key 50 level in November at 47.1 (up from 45.9 in October) and 44.5 (44.6) respectively.

Far-right populist Geert Wilders has emerged as the winner in the Dutch elections and said he plans to lead the country’s next government, though negotiations on putting together one are likely to take some time. Among other things, Wilders has promised a binding referendum on EU membership.

Markets are likely to be relatively quiet today given Thanksgiving in the US, while economic data due include flash PMIs for November for the Euro area and the UK as well as the Q3 Labour Force Survey in Ireland – the latter will provide an update on recent employment trends in the economy.