Main currencies steady

There is not much change in the main currency pairs this morning. The euro and sterling continue to trade below $1.21 and under $1.40 against the dollar respectively, while the single currency-pound exchange rate remains within the very narrow 86p to 87p range that has prevailed for the last while now

There was a notable jump in core bond yields yesterday, with US and UK 10-year yields rising by the best part of 10bps to 1.48% and 0.78% respectively and equivalent German yields increasing by just a bit less to -0.29%. Meanwhile, US equity markets fell, led by a 2.5% decline in tech stocks, though European markets finished with modest gains.

Fed member Evans says the rise in US yields recently reflects a better economic outlook, noting that the vaccine rollout “seems to be going reasonably well and that means the rebound in growth (in the US) should be that much better”

The Chancellor of the Exchequer in the UK has announced an extension of the furlough scheme to the end of September and of the stamp duty holiday on house purchases to the end of June, though he plans to increase the corporation tax rate to 25% in 2023 (from the current rate of 19%) albeit he has also introduced temporary incentives to boost investment over the next couple of years

Following a record 9.9% contraction in GDP in the UK in 2020, the Office for Budget Responsibility (OBR) expects a vaccine-driven recovery to take hold this year with forecast growth of 4%, accelerating to 7.3% in 2022

Data due today includes unemployment and retail sales in the Euro Area; the latest construction PMI in the UK; and jobless claims and factory orders in the US