Dollar still on the front foot

The dollar has extended its gains against both the euro and the pound to trade at around $1.0975 and $1.29 respectively, its best levels against these two currencies since early October and mid-December respectively. This all means that the euro-sterling rate continues to do not an awful lot, with (broadly) 84p to 85p the range this week to date and currently at around 84.75p

Stocks nudged higher again yesterday with both European and US markets closing in positive territory. The rise in core bond yields came to a halt though, and indeed they have nudged down overnight with US 10-year yields back to about $1.60 ahead of this afternoon’s key ‘payrolls’ report

Fed central bank member Quarles says “in addition to the human toll, the (corona) virus also threatens significant economic disruption, particularly for China and its neighbours” adding that while he’s  “optimistic about the outlook (for the US economy)…I am also highly aware that some notable risks still threaten growth, both overseas and at home.”

The industrial sector in Germany ended 2019 on a very weak note with output falling by 3.5% in December (from November) leaving it almost 7% lower than in the same month a year earlier. For the final quarter of last year as a whole output was down almost 2% from the immediately prior quarter, which will have weighed on overall GDP in the final months of 2019

Today’s ‘payrolls’ report in the US is expected to show employment rose by around 160k in January (from December) according to the consensus forecast, with the unemployment rate seen remaining at 3.5% and the annual rate of growth in hourly earnings ticking up to 3%