Dollar on the front foot

The euro and sterling both lost ground against the dollar yesterday and are trading just under  $1.08 and just above $1.24 respectively this morning, leaving the EUR/£ exchange rate still hovering a little below 87p.

Government bond yields have risen further. US and German 10-year yields are up about 5bps or so from this time yesterday morning to around 3.65% and 2.45% respectively, while UK yields are about 10bps higher at 3.95%.

Interest rate markets are currently pricing in a bit more of a chance of a Fed rate hike in June, and pricing in a little less in terms of rate cuts over the second half of this year, than was the case immediately following the central bank’s meeting at the start of this month. They still see the ECB and BOE both hiking rates by circa 50bps over the next few months.

Equity markets had a positive session yesterday with both the Euro Stoxx 50 and the S&P 500 gaining around 1% on the day.

Consumer confidence in the UK improved for a fourth month in a row in May, according to GfK’s sentiment indicator published overnight

It is very quiet on the economic data front today with little of note scheduled for release.