Euro loses ground to dollar

The euro lost ground against the dollar taking it back down to just under $1.05 this morning from touching off $1.06 yesterday. Sterling also lost out against the US currency, falling to under $1.22. That left the euro sterling exchange rate fairly unchanged at 86p

European equity markets closed up a touch yesterday,  however US stocks closed down with the S&P losing 2%. European government bond yields are moving lower this morning with German 10-year yields down about 7 basis points to 1.55%, having gained circa 20bps since Friday. European bonds may be benefiting from news this morning that June inflation in one German state (North Rhine Westphalia) came in lower than expectations with a monthly decline in prices, albeit just 0.1%. The other German states and the national data will be released later today

ECB President Christine Lagarde reaffirmed that the ECB will increase interest rates by initial 25bps at the July meeting. She also said that faster and higher rate hikes could be in the offing that “there are clearly conditions in which gradualism would not be appropriate. If, for example we were to see higher inflation threatening to de-anchor inflation expectations, or signs of a more permanent loss of economic potential that limits resource availability, we would need to withdraw accommodation more promptly”

US consumer confidence fell for a second month in June, according to the conference board measure it fell to 98.7 this month, a 16 month low, from 103.2 in May. Consumer expectations also fell, to close to a 10 year low, as households suffer from cost of living woes and increased fears of a recession

Data due today includes German inflation data, EU confidence and there will be a number of ECB speakers at their conference in Sintra