Main currency pairs in tight ranges

The main currency pairs continue to trade in relatively narrow ranges. The euro briefly rose above $1.05 against the dollar at the open yesterday on relief at the outcome of the German election before falling to around $1.0450 late in the day after Donald Trump said tariffs on Canada and Mexico would go ahead, but is back up at about $1.0470 this morning. Sterling fell to a low of around $1.2610 following Trump’s comments and remains close to these levels at the off today. All of this in turn leaves EURGBP marginally firmer this morning at almost £0.83.

US bond yields extended their decline yesterday and have fallen further overnight amid weakness in Asian equities, with benchmark 10-year yields down around 10bps to under 4.35% since Friday’s close as the market also prices in more in terms of Fed rate cuts (about 50bps is now expected for this year). US stocks had a choppy session but the S&P 500 and the Nasdaq both ended in the red, with the latter shedding almost 1.5% on the day.

The business mood in Germany remained subdued in February according to the latest ifo survey, though expectations regarding the outlook improved a little. It was noted that firms have been “holding back investment” recently but that could change later in the year “if the new government comes up with an agenda that inspires confidence.” Separately, data released earlier this morning confirmed that the economy contracted in the final quarter of last year, with GDP falling by 0.2% from Q3.

For the day ahead, the ECB publishes its latest Indicator of Negotiated Wage Rates, while in the US the Conference Board publishes the results of its February consumer confidence survey. A number of central bank members are also scheduled to speak over the course of the day.