Euro on the back foot

The euro has lost ground against both the dollar and sterling amid concerns about the impact of a reduction in gas supplies and an associated spike in gas prices on the Euro area economy, with the single currency weakening by around one cent and 1p to $1.01 and 84p respectively

European equity markets also lost ground yesterday shedding almost 1%, while German government 10-year bond yields fell by around 10bps to 0.90% with equivalent US yields broadly flat at 2.80%

The IMF has lowered its forecasts for global GDP growth in 2022 and 2023 by 0.4 and 0.7 percentage points to 3.2% and 2.9% respectively, warning that the risks to the outlook are firmly on the downside. It sees growth in the US and the Euro area economies slowing to just 1% or so next year, and to 0.5% in the UK

The Fed seems on course to announce another 75bps increase in interest rates (to a range of 2.25% to 2.50%) following the conclusion of its monetary policy meeting later today, which would bring the cumulative hike in rates since March to a sizeable 225bps (though the Fed is unlikely to stop at that)

Data due today include capital goods orders and trade balance in the US