Main currency pairs little changed

It remains relatively calm in FX markets with the main currency pairs confined to fairly narrow ranges. The euro is trading at around $1.0940 and 86.1p against the dollar and sterling respectively this morning, while the pound is hovering just north of $1.27 against the US currency. Today sees the release of the regular weekly jobless claims data in the US, which have the potential to cause some volatility in markets generally given the current focus on the state of the labour market.

Government bond yields continued to edge higher again during yesterday’s session, though they are lower this morning after a relatively weak close for US stocks, with the main indices off around 1%,  and a decline (albeit modest) in Japanese equities overnight.

ECB Governing Council member Rehn has said the recent turbulence in markets “was an overreaction,” adding that the US economy remains “relatively strong”. He also said the ECB can continue to lower interest rates if its confidence in slowing inflation continues. The market full expects the ECB to cut rates by 25bps at next month’s meeting.

In the UK, the latest RICS housing survey “points to a largely stable trend in market activity,” with a modest improvement in new buyer enquiries in July, while an easing in mortgage interest rates in recent weeks is expected to “contribute to a pickup in sales volumes moving forward.”

Apart from today’s jobless claims numbers in the US, there is little else of note due in terms of economic data. In relation to the former, the number of new jobless claimants has been trending higher over the past number of weeks, contributing to concerns about the health of the labour market.