Main currency pairs little changed
The euro has been confined to a narrow range against the dollar so far this week, trading between $1.0650 and $1.0750 and hovering just above $1.07 this morning, while the pound has been in a slightly broader range of $1.2240 to $1.2430 and is currently trading just below $1.23. This leaves EUR/£ at 87.1p, near its high for the week and up from Monday’s low of $1.0650.
In government bond markets, longer-term yields fell further yesterday, albeit modestly so, while short-dated yields were generally flat as central banks continue to insist they will not be lowering interest rates anytime soon. Meanwhile, European stocks chalked up gains of around 0.6% while US indices were largely unchanged overall.
The Governor of the Bank of England, Andrew Bailey, says “it’s really too early to be talking about cutting (interest) rates,” albeit acknowledging that “the market…has to reach a view on the future path of rates.” His ECB counterpart, Nagel, says he doesn’t like the “discussion going on about when will be the point (to) lower interest rates,”, adding the discussion “is not helpful (and) is much much too early.”
The IMF has also weighed in on the interest rate debate in its latest report on the European economy, arguing that “with inflation…expected to recede only gradually…maintaining a restrictive monetary policy stance is paramount to securing (a) return to target within a reasonable timeframe.”
Higher interest rates continue to weigh on the UK housing market. The latest RICS survey (October) reports “a subdued picture…as the market continues to adjust to the tighter lending climate”, though some indicators, including new buyer enquiries, were less negative than in recent months.
Euro area consumers’ expectations for inflation over the next year rose to 4% in September from 3.5% in August according to the ECB’s latest survey, perhaps in response an increase in energy prices over this period, though medium-term expectations (i.e. over the next 3 years) were unchanged from August at 2.5% (and down from 3% at the end of last year).
It is quiet enough on the data front today with jobless claims in the US the main release of note, while a number of ECB and Fed members are scheduled to speak through the course of the day.