Dollar remains near lows for the week

The fall in US government bond yields that followed Wednesday’s Treasury announcement of increased support for the long end of the market proved very short-lived indeed with 10- and 30-year yields backing up again in yesterday’s trading. Notably though, the dollar – which had fallen in tandem with the decline in US yields – failed to stage any meaningful recovery. It remains close to its post- Treasury announcement lows, leaving it vulnerable to further weakness in the near-term. EURUSD and GBPUSD are currently trading at about $1.17 and $1.3650 respectively, while EURGBP is at around £0.8570 this morning.

US government bond yields rose across the curve with 10- and 30-year yields – which both rose by 6bps- fully/almost fully reversing Wednesday’s move lower. German yields were largely unchanged on the day, despite the move higher in US yields and an increase in oil prices, while UK bonds again treaded a middle path between the US and German with yields rising by 2-3bps. In equity markets, US stocks had a poor session with the main indices shedding around 1%, comfortably reversing the modest gains they made on Wednesday, while European equities finished marginally lower on the day.

Retail sales in the UK fell by 0.5% in volume terms in August according to data released a short while ago – in line with the consensus forecast – but over the three months to July were up 1.1% on the three months to April (and up 3% on May-July 2025). Separately, consumer confidence rose for a second month running in August according to the GfK measure, reaching its best levels in almost two years.

Fed member Daly says she expects US inflation to gradually decline as the price shocks from tariffs, oil prices, and the AI build-out start to fade. She adds that she was “very supportive” of the decision to keep interest rates unchanged at the July meeting but will continue to look at incoming information for any signs that inflation is becoming a more persistent problem.

For the day ahead, economic data scheduled for release include flash PMI readings for August in the Euro area, UK and US, while the ECB publishes its latest (July) survey of consumer inflation expectations and its index of negotiated wages for the second quarter of the year.