Main currency pairs little changed

The main currency pairs were in consolidation mode yesterday after the notable moves seen on Friday and indeed over the course of last week. The euro and sterling are not much changed from yesterday morning’s levels against the dollar at around $1.1170 and $1.32 respectively, while EURGBP is trading at about £0.8460. It is quiet enough on the economic data front today, so further consolidation may be in order.

It was relatively quiet in government bond markets with yields ending marginally higher on the day. Similarly in equity markets, European and US stocks ended slightly lower after chalking up solid gains last week. Meanwhile, oil prices have moved up amid the ongoing conflict in the Middle East and concerns about oil production in Libya. Brent crude is close to $81.5 per barrel, up from around $76 in the middle of last week, although this is still in the bottom half of its 2024 to date range of $75 to $92 p/b and below its level of a year ago.

Fed member Daly has said “the time to adjust (monetary) policy is upon us,” echoing Powell’s comments from Friday, adding that the Fed still has to bring inflation down to its 2% target while  preventing restrictive policy from harming the labour market (suggesting she would prefer to start rate cuts with a 25bps move).

The ifo index of the business climate in Germany fell for a third month in a row in August, amid a notable decline in sentiment in manufacturing, prompting the ifo Institute (which compiles the index) to say that “the German economy is increasingly falling into crisis.” Separately, consumer confidence has declined further according to the GfK index, while the economy contracted by 0.1% in the second quarter according to the latest GDP estimate, both published earlier this morning.

It is relatively quiet in terms of economic data today, with consumer confidence and house prices due in the US and the latest CBI retail sales survey scheduled in the UK.