Euro a touch weaker

The euro is a touch weaker against both the dollar and sterling this morning trading back below $1.16 and close to 84p respectively, while the pound has strengthened to over $1.37 against the US currency

Bond yields jumped late on Friday with US 10-year yields now almost 10bps higher from last Thursday’s close at around 1.61% and equivalent UK yields up a similar amount over the same period at almost 1.15%. Meanwhile, German 10-year yields are about 5bps higher at -0.15%

Bank of England Governor Andrew Bailey says rising energy prices mean higher inflation “will last longer” which in turn “raises…the fear and concern of embedded (inflation) expectations”  adding that’s why “the Bank of England have signaled, and this is another signal, that we will have to act” by raising interest rates.  This all suggests a hike could now come as soon as the November meeting

The President of the ECB, Christine Lagarde says the central bank’s “monetary policy will continue supporting the economy in order to durably stabilize inflation at our 2% inflation target over the medium term” adding that the ECB is “committed to preserving favorable financing conditions for all sectors of the economy over the pandemic period”

The pace of economic growth in China slowed in the third quarter, amid supply constraints and power shortages – GDP rose by just 0.2% in the quarter with the year-on-year increase dipping to 4.9% from 7.9% in in Q2

Data due this week include Euro area and UK CPI inflation on Wednesday and UK retail sales and consumer confidence on Friday