Euro a touch firmer

The euro briefly rose above the $1.06 level yesterday and is trading around $1.0585 this morning, slightly firmer than yesterday morning helped by a modest paring back of expected ECB rate cuts. Sterling is also a touch firmer against the dollar, trading at about $1.2670, with EURGBP little changed hovering around the £0.8350 mark.

German government bond yields edged higher yesterday – by around 5bps in the 2-year area – and UK yields ended broadly flat, while US yields nudged down for a second day running. Yields generally are lower at the start of play today.

In equity markets, European stocks ended yesterday’s session largely unchanged, while US stocks partially recovered from Friday’s steep enough decline (with the S&P 500 up around half a percent or so).

ECB member Stournaras says another cut in interest rates next month is ‘more or less’ a done deal with ’25 basis points the optimal reduction,’ while his colleague Makhouf says there would need to be an ‘overwhelming’ case for a ‘big’ cut in rates (suggesting a 50bps move in December is unlikely).

It is a quiet day ahead in terms of economic data with a final reading of October CPI inflation due in the Euro area and housing starts scheduled in the US. On the central bank front, Bank of England Governor Bailey and colleagues appear before the Treasury Committee to discuss the latest Monetary Policy Report, while there are a few ECB members due to speak over the course of the day.