Dollar pares gains

The euro touched off just below $1.04 to the dollar for a time yesterday before making up some ground late on to trade back to $1.045 now. The dollar pared its gain following slightly lower than expected US personal consumption expenditures inflation, which suggest prices pressures could be easing somewhat, and weak consumer spending data. Against sterling, the single currency fell below 86p for a time before bouncing back above that level where it remains this morning

Equity markets lost out on both sides of the Atlantic yesterday with the Eurostoxx down 1.7%, the FTSE losing almost 2% and the S&P 500 down 0.9%. The risk off day saw bonds make further gains with 10-year German yields down almost 20 basis points taking them back to 1.33% and US 10-year yields down 9 basis points to just under 3%

US real personal spending fell in May for the first time this year, down 0.4% month-on-month, while previous month’s gains were revised downwards. The weaker number heightens fears that the US economy may not be weathering the rapid interest rate hikes needed to cool inflation and that low growth, or even a recession, may be in the offing. Annual core PCE inflation did slow in May to 4.7% from 4.9% in April, signalling that core price pressures may have peaked

Data due today includes Euro area ‘flash’ inflation data for June, manufacturing PMI’s from many countries while speakers include ECB  members Panetta and de Cos