Euro off its highs

The euro lost some ground against the dollar on Friday following the release of the latest ‘payrolls’ report in the US, falling to almost $1.17 at one stage. It has recovered some ground since, though at $1.18 this morning it remains off last week’s high over $1.19

Employment in the US rose by 209,000 in July, ahead of the consensus forecast (+180k) and the fifth month in seven that jobs growth has been north of 200k. This has been sufficient to keep the unemployment rate ticking lower – it has edged down to 4.3% from 4.7% at the end of last year – though hourly earnings growth has yet to accelerate (it has averaged 2.6% so far this year, the same as for 2016 as a whole)

US bond yields rose post the jobs numbers (10-year yields were about 5bps higher at 2.26%), which keep the Fed well on track to begin reducing its balance sheet (which swelled during the QE period as the Fed bought bonds in large amounts) fairly soon

Sterling lost ground last week after the MPC’s 6-2 vote to keep UK interest rates unchanged at 0.25%, and is trading at around 90.5p against the euro this morning. Amongst other things, the MPC noted slowing activity in the UK housing market recently, and in this regard, annual house price inflation eased to 2.1% in the 3 months to July according to Halifax data published yesterday, down from almost 4% in Feb-Apr

It is relatively quiet on the data front this week, with UK industrial output (Thursday) and US CPI (Friday) amongst the main releases