Dollar lower on the week

The euro and sterling both regained some ground against the dollar last week, having fallen in each of the two previous weeks, gaining around half a cent and one and a half cents overall respectively. They have though retreated from their very best levels of the week reached immediately following last Thursday’s softer than forecast US jobs report (of around $1.1470 and $1.3385) to trade at about $1.1425 and $1.3340 this morning. EURGBP is trading at around £0.8565, having fallen to a more than 12-month low of just under £0.8550 last week following Wednesday’s weaker than expected Euro area inflation data for June. It’s a quiet relatively week ahead in terms of economic data with today’s ISM services index in the US one of the main releases of note, while the minutes of last month’s Fed monetary policy meeting, the first under new Chair Kevin Warsh, are published on Wednesday.

Government bond yields were generally higher on the week in a “risk on” environment that saw equity markets advance. The US led the way with 10-year yields increasing by around 11bps, while equivalent German and UK yields rose by around 8bps and 5bps respectively. European stocks outperformed on the week with the Stoxx Europe 600 gaining almost 3%, while the S&P 500 in the US gained almost 2%.

ECB Governing Council member Moulin says the “very rapid” fall in oil prices “puts us in a better position on (interest) rates,” while refraining from indicating what the central bank might do at forthcoming meetings. The market has pared back expectations for further rate hikes quite considerably over the past few weeks, with another 25bps hike in the deposit rate not fully priced in until around June next year.

Looking to the week ahead, in addition to today’s ISM services index in the US, other economic data due include Euro area retail sales and producer prices, both today, and the RICS housing survey in the UK on  Thursday. There are a number of ECB members due to speak over the course of the week.