Euro loses ground to dollar

The euro lost some ground against the dollar during the course of last week, falling from a high of over $1.24 to under $1.23 by Friday (which is where it is trading this morning). The dollar was generally firmer last week – it strengthened against the yen and sterling as well – supported by rising US bond yields

Sterling fell from an intra-week high of almost 86p against the euro to a low of almost 88p, before recovering a little again, after the BOE Governor, Mark Carney, cast some doubt on a May interest rate hike. The pound also weakened against the dollar, shedding around 2 cents over the week as a whole (and more than 3 cents from its highs)

Bond yields in the US rose quite sharply last week, with 10-year yields increasing by the best part of 15bps to close at a more than 4-year high of 2.96%. Hardening market expectations for Fed rate hikes, the prospect of rising inflation ahead, as well as higher oil prices, all probably contributed to the rise in yields.  German and UK 10-year yields also rose though by less than in the case of the US (8bps and 4bps respectively)

Bank of England MPC member, Michael Saunders, indicated on Friday that he favours raising interest rates, saying ‘our foot no longer needs to be so firmly on the accelerator’

The ECB Governing Council meets this Thursday but it is expected to keep its policy stance unchanged, with QE continuing and interest rates remaining at historic lows

Data due this week include a first estimate of first quarter GDP growth in the US and the UK, both scheduled for Friday, while today we get flash PMIs for April in the Euro area