Euro slips against the dollar

The euro is under pressure against the dollar, slipping back towards the $1.13 level from around $1.14, as international equity markets lose ground. Sterling has also weakened a little against the US currency to trade at around $1.27 this morning (having slipped below this level overnight), while it is largely unchanged against the euro at just over 89p

US equity markets in particular took a smacking yesterday with the main indices falling by between 3% and 4% (though they are still managing to hold above their 2018 lows which were set last February), as Donald Trump reminded us that he remains “Tariff Man” in the event that the US-China trade truce is not extended beyond the planned 90-day cooling off period

The rally in core bond markets is continuing in earnest amid the equity sell-off as US 10-year yields fall further to stand at almost 2.90%, bringing their decline to around 35bps in less than a month (a substantial decline by any standards). Equivalent German yields, meanwhile, are now down to 0.25% from close to 0.50% in early November

Fed member Williams says the US economy and labour market are both “strong”, inflation is likely to move a little above 2% and, all risks considered, he believes further gradual increases in interest rates are still warranted. This is at odds with the markets’ current view that the Fed might soon pause in the hiking cycle, which is of course what has helped trigger the decline in bond yields

In a potentially significant development, the UK parliament has voted to give MPs a greater say in determining “what happens next” in the event that the Brexit deal is voted down next Tuesday (11th December), which it is been reported may reduce the chances of a “no deal” Brexit

At home, the latest Exchequer returns show tax receipts up 7.6% year-on-year for January-November and 2.4% (or €1,225 million) ahead of target, helped by strong corporation tax revenues

Data due today include services PMIs in the UK and the Euro area