Dollar marginally firmer

There’s not much change again in the main currency pairs as they continue to trade in fairly narrow ranges. The euro is hovering just below $1.18 against the dollar, while sterling has come back a little against the US currency but remains above the $1.35 level, leaving both still on course to advance for a second week in a row. EURGBP is a touch firmer, trading back above the £0.87 level this morning (at about £0.8715). Meanwhile, Donald Trump says Israel and Lebanon have agreed to a 10-day ceasefire starting today, and there’s talk that talks between the US and Iran will take place this weekend ahead of the expiry of their 2-week ceasefire next Wednesday.

The rally in government bonds ran out of steam during the course of yesterday’s trading, not helped by a renewed rise in oil prices. US yields reversed course to end slightly higher on the day, while German yields fell by a couple of basis points but finished well off their lows of the day. Equity markets had another mixed session. US indices edged higher but European stocks ended marginally lower on the day.

Headline inflation in the Euro area accelerated to 2.6% in March from 1.9% in February according to the final CPI reading, slightly ahead of the initial estimate of 2.5%. Rising energy prices more than accounted for the increase in inflation last month, with core inflation (which excludes energy and food prices) nudging down to 2.3% from 2.4% in February.

ECB member Rehn says “what matters most (for monetary policy) is whether the (energy price) shock has persistent effects on inflation and the general price level,” adding that it’s “possible though by no means certain” that the ECB would look through the shock. As things currently stand, the market sees only a small chance of an interest rate increase at this month’s meeting but is pricing in around 50bps of hikes by the end of this year.

It is a very quiet end to the week in terms of economic data, with little or nothing of note scheduled for release. We will hear from a number of Bank of England and Fed members during the course of the day.