Dollar slide continues

Broad-based dollar weakness remains the main theme in the foreign exchange market. It continues to lose ground against all the other main currencies, falling to fresh lows of over $1.2550 to the euro overnight and sliding to under Y106 against the yen. Sterling’s gains against the US currency (to over $1.41) have broadly matched those of the euro, leaving it largely unchanged against the single currency at just under 89p

The dollar’s weakness is something of a surprise, given that US bond yields continue to rise relative to yields elsewhere, something that might be expected to lend support to the currency.  For example, 2-year US yields have risen by circa 25bps relative to equivalent German yields over the past few weeks, as the market expects the Fed to continue raising interest rates this year while the ECB is expected to keep rates on hold

Equity markets recovered more ground yesterday. The S&P 500 closed up just over 1%, bringing its gains from last week’s low to around 6%. European stocks also rose, ending around 0.5% higher on the day

Data due today includes January retail sales in the UK. Sales fell sharply in December, by around 1.5% from November, so there’s likely to have been some pay back for this last month (the consensus expects  an increase of 0.5%)

Other data scheduled for today includes consumer confidence and housing starts in the US