Dollar off its lows for now
The euro reached a fresh 2024 high of around $1.1215 against the dollar yesterday but has since retreated to about $1.1150. It’s the same story with sterling, which has fallen back from yesterday’s best levels of about $1.3420 against the US currency to trade at around $1.3350 this morning. This leaves EURGBP at £0.8350, off its lows of just under £0.8320 earlier in the week.
The rally in US 2-year bonds stalled yesterday with yields ending marginally higher on the day, while 10-year yields rose by around 5-6bps. Equivalent German and UK yields also nudged up. In equity markets, European stocks shed around 0.5%, reversing some of Tuesday’s gains, while US indices ended slightly lower as well. European stocks have opened higher this morning though, following strong gains in Asian markets overnight.
The OECD expects global GDP growth “to stabilise at 3.2% in 2024 and 2025”, according to its last Economic Outlook, with a continuing fall in inflation, rising real incomes, and declining interest rates in many economies helping to underpin demand. Growth in the US is expected to slow from a projected 2.6% this year to 1.6% in 2025, while Euro area growth is forecast to pick up from 0.7% to 1.3% over the two years (with 2025 revised down from 1.5% previously).
Fed Governor Kugler has said he “strongly supported last week’s decision” to cut interest rates by 50bps, and noted that, “if progress on inflation continues as I expect, I will support additional cuts in the federal funds rate going forward.”
Bank of England MPC member Greene, who voted against August’s quarter-point cut in rates, says she believes “a cautious, steady-as-she goes approach to monetary policy easing is appropriate” until there is greater evidence that inflationary pressures in the economy are dissipating.
Economic data due today include money & credit growth in the Euro area and jobless claims and a third estimate of Q3 GDP growth in the US. A number of Fed and ECB members are scheduled to speak over the course of the day.