Euro drifting lower

The euro is drifting lower to trade at around $1.18 against the dollar and just below 89p against sterling this morning, with the pound hovering a touch under the $1.33 level against the US currency. European and US equity markets both gained almost 2% yesterday while core bond yields fell, led by a decline in German 10-year yields which are now back trading close to -0.50%

According to the Financial Times, “several” ECB members have said the Euro’s recent appreciation, together with weak demand, risks holding back the recovery in the Euro Area economy, and could lead the central bank to cut its forecast for inflation

Bank of England member Ramsden says the central bank has room to materially increase the size of its bond purchases (QE) programme if needed, as his colleague Vleighe says there’s a risk it could take some time for the economy to get back to full capacity following the fall-out from COVID-19

The EU’s Chief Negotiator, Michel Barnier says he is “worried” about the Brexit talks as the UK “continues to disappoint” on key issues like state aid and fisheries

The French government has unveiled a 100 billion euro stimulus plan for the economy – details of which were outlined over the summer – that includes wage subsidies, tax cuts for businesses and funding for environmental projects

Data due today include services PMIs (final readings for August) in the main economies, as well as retail sales in the Euro Area and jobless claims in the US