Main currency pairs little changed

The euro and sterling have both failed to hang on to the modest gains they made against the dollar in yesterday’s session, falling back to trade at around $1.0540 and $1.2170 this morning. This in turn leaves EUR/£ broadly unchanged trading at 86.6p.

In government bond markets, US 10-year yields have retraced a good deal of last week’s decline, rising by the best part of 15bps from Friday’s close to 4.75%. UK and German yields are also edging higher and are now back up to 4.47% and 2.80% respectively.

Stocks in the US ended in positive territory yesterday, with the S&P 500 adding about 1%, while European indices also advanced albeit the gains were more modest.

In the UK, the annual rate of growth in whole-economy weekly earnings eased a touch in the three months to August but remained elevated, according to data published by the ONS this morning, coming in at 7.8% from 7.9% in the three months to July (while private sector wage growth dipped to 8% from 8.1%).

Bank of England Chief Economist Huw Pill says the Monetary Policy Committee still has “some work to do” in order to get inflation back down to its 2% target.

The ECB is watching the oil price for any inflationary impact from the Israel-Hamas conflict, President Christine Lagarde is said to have told a meeting of euro-area finance ministers.  Brent crude has eased back to around $90 per barrel but is still about $5 higher than immediately before the conflict erupted.

Fed member Goolsbee says it is “undeniable (that) inflation is trending down compared with what it has been and that’s what we want” to see.

Economic data due today includes the ZEW index for the Euro area and retail sales and industrial output in the US.