Euro takes a bath

The euro has fallen sharply against the dollar following the outcome of yesterday’s ECB meeting. It has shed the best part of 3 cents to trade at around $1.1550 this morning, and has softened to under 87.5p against sterling.  German bond yields have also fallen quite a bit, with 10-year yields down around 10bps to under 0.40%

The ECB did announce a tapered end to its monthly bond purchases, which will now finish at the end of this year, as it is has become more confident that inflation will return to its target over the next few years. However, what Mario took away with one hand, he more than gave back with the other, promising to keep interest rates at their present level through summer 2019, which effectively means a first rate hike is unlikely before September next year (the market had been pricing in a first increase around June time before yesterday’s announcement)

Retail sales in the UK rose strongly for a second consecutive month in May, increasing by 1.3% in volume terms from April, and were running significantly ahead of their level in the first quarter, which raises the chances of a decent rebound in GDP growth in Q2

Similarly in the US, retail sales rose at quite a robust pace last month, which suggests consumer spending growth has reaccelerated in Q2 from what was a relatively soft first quarter

Trump it seems has decided to go ahead with tariffs on $50bn worth of imports from China, although markets are taking this in their stride

Data due today include a final CPI reading for May in the Euro area as well as industrial production and consumer confidence in the US