Euro, pound off highs versus dollar

The euro and sterling got up to highs of over $1.0520 and north of $1.27 against the dollar during yesterday’s session (a new 2025 to date high in the case of the pound), though they have since retreated following comments by Donald Trump that his administration would “soon” impose tariffs of 25% on the EU. They are holding up better than might have been expected though, trading at around $1.0470 and $1.2665 this morning, while EURGBP has weakened a little to about £0.8270.

Trump’s tariffs comments cut short a recovery of sorts in US stocks with the S&P 500 giving up modest gains to end flat on the day at the New York close. (European stocks had earlier finished with gains of almost 1.5%). US bond yields also reversed course as stocks weakened with 10-year yields ending almost 5bps lower at 4.25% (though they have edged up in Asian trading overnight). Elsewhere, German 10-yields were marginally lower on the day, while UK yields ended broadly flat.

It was very quiet yesterday in terms of economic data with new home sales in the US the only release of note. They fell quite sharply in January, down almost 11% from December, which continued the run of soft data out of the US over the past week or so.

Provisional Spanish inflation data for February released a short while ago shows the headline rate of inflation was unchanged from January at 2.9%, though it looks as if the core rate nudged down again this month. Inflation data for the Euro area as a whole will be released at the start of next week.

For the day ahead, the main data releases include money supply/credit growth and the Economic Sentiment Indicator in the Euro area and weekly jobless claims, capital goods orders and a second estimate of Q4’24 GDP in the US, while the ECB publishes the minutes of last month’s monetary policy meeting.