Euro loses ground

The euro has weakened to around $1.11 against the dollar after ECB Governing Council member Ollie Rehn – ahead of the central bank’s next meeting in just four weeks’ time – said “an  impactful and significant” easing of monetary policy  is required, by which he probably means interest rate cuts and a restart  to QE. This saw the single currency slip against sterling also, to just over 91.5p which is well off its high of over 93p at the start of this week

Nor surprisingly, core bond yields fell on Rehn’s comments – which also noted that “when you’re dealing with financial markets, it’s often better to overshoot than to undershoot, and better to have a very strong package of policy measures than to tinker”  – with German 10-year yields delving yet further into negative territory to stand at around -0.70%

The market sees the ECB cutting its deposit rate (currently -0.40%) by at least 10bps in September and is attaching a high probability to a 20bps reduction, while it also expects the ECB to restart its bond purchases (QE) which would probably continue well into 2020

Fed member Kashkari says that while “US consumers are still feeling confident (and) still spending, the global economy is slowing (and) investment by American companies is slowing”.  Given this, he says he’s leaning towards…the need to give more stimulus to the economy” (via a further reduction in interest rates)

Retail sales in the US rose quite strongly in July according to data published yesterday, but output in the manufacturing sector fell for a fifth month in seven last month, suggesting it is something of a tale of two economies at the moment

Data due today include consumer confidence and housing starts in the US