Main currency pairs little changed

The trading ranges in FX markets remain narrow. The euro has advanced marginally against both the dollar and sterling to $1.0950 and 86p respectively, while the pound continues to trade just over $1.27 against the US currency.

Government bond yields nudged higher after generally firmer than expected US economic data. US 10-year yields are up to 3.75% and German and UK 10-year yields are at around 2.35% and 4.35% respectively.

ECB’s Lagarde says “barring a material change to the outlook, we will continue to increase (interest) rates in July”, adding that “it is unlikely that in the near future (we) will be able to state with full confidence that the peak rates have been reached”. This clearly leaves the door open to an increase in rates beyond July.

Consumer confidence in the US rose for a second month running in June to its highest level since January last year, according to the Conference Board’s measure, while new home sales there increased for a third consecutive month in May, rising by 12% from the previous month.

Economic data due today include money supply/lending in the Euro area and the trade balance in the US, while the Bank of England’s Governor and Chief Economist both speak at the ECB’s central banking forum in Sintra, Portugal.