EURUSD back at around $1.16

While Donald Trump’s firing of Fed Governor Cook – which will be contested in the courts – has drawn much commentary, the fallout in financial markets has been very limited so far. In FX, the dollar weakened a little initially but has recovered since, and is currently not much changed from yesterday morning’s levels against both the euro and sterling at around $1.1610 and $1.3450 respectively. EURGBP has been confined to a very narrow range (£0.86 to £0.87) over the past couple of weeks or so, trading at around £0.8630 this morning.

US long-dated bonds sold off initially in response to the Trump-Cook news but they also recovered during the course of yesterday’s session; 30-year yields ended around 3bps higher on the day, having been up around 6bps at one stage, and 10- year yields about 2bps lower (while 2-year yields outperformed, falling by 5bps). Elsewhere in bond markets, German yields closed lower across the curve, albeit marginally so, while UK yields edged higher. In equity markets, the main US indices erased early losses to finish with gains of just under 0.5%, as attention now turns to Nvidia’s earnings due after today’s US close. European stocks had another poor session, ending more than 1% lower yesterday after shedding almost 1% on Monday, though they have made a positive start today (+0.5%).

Consumer confidence in the US nudged down in August according to the Conference Board’s measure, albeit from an upwardly revised reading in July, and remains well below its level at the start of this year. Notably, consumers’ assessment of current job availability declined for an 8th consecutive month, with the gap between those saying ‘jobs are plentiful’ and those saying ‘jobs are hard to get’ at its tightest since early 2021 (during the pandemic period).

It is extremely quiet on the economic data front with little or nothing of note scheduled for release, so markets may just tread water for the day.