Dollar rally slows

Sterling’s rout and the dollar rally slowed yesterday with the UK currency trading at around $1.07 for much of the day – though dipping below $1.07 this morning – off its low of $1.04 on Monday. The euro also largely held up against the dollar, remaining trading at c. $0.96 throughout Tuesday, though again like sterling it’s weaker this morning, losing a 1/2 cent to $0.955 currently. As a result, there was little change in the EURGBP cross which is at 89p

The respite for sterling did not extend to gilts with 10-year UK yields up another 25bps to 4.5% with the market shifting up its expectation of Bank of England interest rate increases. Other countries saw their yields rise, but to a lessor extent, with 10-year German yields up c.11bps to 2.2% and French 10-year yields up 12bps to over 2.8%. US yields ticked up also with 10-years up 3bps to c.3.95%. Yields are again heading higher on the open this morning

Equities fell back a little, despite some (relatively)  positive US data, in what is a very volatile market. The Dow Jones lost 1/2% on the day with major European indices also making small losses. US capital goods orders for August held up better than expected with core orders (ex defence) up 1.3% on the month against a projected 0.2% rise, with July core orders also revised up slightly. Conference board consumer confidence also rose by more than expected, to 108 in September from 103.6 in August. Households were more optimistic about incomes on foot of better labour market conditions and upped their outlook for major purchases, such as cars, boosted by cheaper gas prices

In Ireland, Budget 2023 delivered a substantial package of support measures for both families and businesses. This ‘cost of living’ budget has an overall tax and spending package of €11bn, of which €4.1bn is in one off measures including a €600 energy credit to all households, increased social welfare and tax cuts/reliefs. The Government also updated their macroeconomic forecasts and are projecting GDP growth of 10% this year and 4.7% in 2023

Data due today includes the US trade balance and ECB President Lagarde and Fed Chair Powell are among the speakers due out