Dollar loses a little ground

The euro has gained a little against the dollar, up to around $1.183 this morning while the single currency is more or less unchanged against sterling at 85.7p. The euro took some ground against the dollar on Friday after Fed chair Powell’s dovish comments and managed to build on those minor gains. Sterling made similar gains on the dollar and is now approaching $1.38.

In bond markets there was continued modest downward pressure on yields as those comments on Friday contained no surprises and indicated the Fed was in no hurry to raise rates. US 10-year yields lost a few basis points down to c.1.27% and equivalent German yields also down a couple to -0.44%.

Hurricane Ida and the continuing concerns about the delta variant did little to dampen enthusiasm for US equities yesterday with the S&P rising to yet another record high. Tech stocks were winners while financial services lost out amid worries about insurance costs from the hurricane

Concerns the hurricane damage could impair oil production in the region did push oil a little higher with WTI crude rising about 0.5% to $69 a barrel, up from around $65 at the beginning of last week

German HICP inflation rose to 3.4% year-on-year in August, the highest since 2008. Much of this is driven by base effects and food and energy price increases. Most forecasters predict that the annual rate could well head higher in the coming months but the increase is likely to be temporary. The flash inflation reading for the EU as a whole is due today and the ECB’s view continues to be that this increase in inflation is transitory. Also out today is ECB chief economist Philip Lane who will address inflation expectations in a speech.