Dollar loses ground

The dollar fell against both the euro and sterling on Friday as markets digested the Fed’s news from Thursday that they would use inflation averaging going forward implying lower for longer rates. The greenback fell to $1.19 versus the euro and $1.33 to sterling. The unsettled political situation in the US ahead of the upcoming presidential election, the continuing public health crisis and the failure of parties in Washington to agree a Covid-19 stimulus package is not likely to be helping the dollar either

Equities seem immune to concerns for now however, with the S&P 500 closing the week out with another gain on Friday taking it to another record high close. Investors appear focused on good news as the US economy reopens – despite the still very high level of COVID-19 cases – and continue to search for returns where government bond yields are ultra-low

Bond yields did rise somewhat last week, in what was for the most part a risk on environment. US 10-year yields rose c.10bps for the week taking them to c.0.72% while in Europe 10-year German yields were also up 10bps to around -0.4%

The Bank of Ireland Economic Pulse fell 2.5 in August to 59.3. Both consumer and business sentiment took a dip this month on the back of renewed concerns about the path of the virus and some setbacks in the process of re-opening the Irish economy

On the agenda this week will be PMI data, euro area inflation ‘flash’ reading and retail sales, Fed’s beige book and US payrolls on Friday while there are a number of central bank speakers due during the week