Dollar under pressure

The dollar has lost ground against the euro, falling from around $1.12 early last week to trade at over $1.14 this morning, as the market scales back expectations for interest rate hikes in the US in 2019 following comments from the Fed Chair and vice-Chair noting slower global growth recently which could impact on the US economy. The market now sees (roughly) only one quarter point increase next year after an expected 25bps hike next month

Sterling is trading close to its lows against the euro – at around 89p – ahead of what could be another tumultuous week in UK politics with Theresa May potentially facing a vote of confidence in her leadership. She will also be in Brussels for talks/negotiations ahead of the planned special European summit next Sunday, which the head of the EU Council, Donald Tusk, has previously said will take place if nothing extraordinary happens

Bond yields in the US fell by more than 10bps last week, taking 10-year yields down to 3.08%, as the market reassessed the outlook for interest rates and equity markets lost ground again, while UK yields also ended lower amid Brexit-related developments

Euro area inflation was confirmed at 2.2% in October, according to the final reading, with the core, or underlying,  rate at 1.1%. The ECB’s Mario Draghi noted on Friday that underlying inflation has “yet to show a convincing upward trend”

Data due this week – which is the week of Thanksgiving  in the US – includes flash PMIs in the Euro area (Friday) while the OECD publishes its latest economic forecasts (Wednesday)