Euro advances

The euro has advanced further against the dollar and is making another assault on the $1.10 level which it got up to last week; whether it gets there again remains to be seen of course, but a break through $1.10 would probably see it strengthen further. Sterling has also gained ground against the dollar to trade above $1.23, leaving it still in and around 89p to the euro

Yesterday’s moves in the currency markets occurred in the context of another positive day for stocks. US equities rose by 1-2%, though this was partly a ‘catch-up’ with Europe following the Monday’s public holiday in the States. Indices in Europe did close higher again yesterday though, by around 1% or so. Core bond yields continued to nudge up, meanwhile, with US 10-year yields back to 0.70% again and equivalent German yields at -0.45%

Consumer confidence in the US rose marginally in May after sliding in March-April, according to the Conference Board’s latest survey, partly reflecting respondents slightly less pessimistic assessment of current labour market conditions. Separately, sales of new homes picked up in April after falling in March, while the annual rate of house price inflation quickened in March

In the UK, the balance of respondents reporting a decline in retail sales in May remained deep in negative territory according to the CBI’s latest survey, though that should change, perhaps quite considerably, in June as most retail activity resumes from the start of next month in line with the government’s three-step plan for re-opening the economy

The BOE’s Chief Economist, Andy Haldane, says the central bank is reviewing the option of setting negative interest rates but added that “reviewing and doing are different things.” He also said economic output (GDP) might not bounce back as quickly as it plunged and may not return to pre-virus levels until the end of next year, noting that “this is a sort of V (-shaped recovery), but it’s a fairly lopsided V”

ECB’s Lane says the “European economy is probably growing a little bit now” but there is “a lot of slack”, meaning this is “mostly a negative period for the inflation path”

It’s quiet data-wise today with the Fed’s Beige Book the only release of note