Quiet start to the trading week

It has been a quiet enough start to the week in FX markets. The euro is little changed against the dollar at $1.093 and marginally firmer against sterling at 86.3p, with the pound slipping a touch to $1.268 against the dollar. The yen has weakened against the US currency (to about Y144) after the Bank of Japan maintained its accommodative monetary policy following its latest meeting.

Government bond yields nudged higher yesterday, but have more or less reversed this in early trading today, while equity markets had a mixed session with US stocks chalking up modest gains but European indices closing slightly lower.

ECB members continue to push back on expectations for an early cut in interest rates, though the head of the French central bank, Villeroy has acknowledged that cuts are likely “at some point in 2024”.

Bank of England MPC member Broadbent says the UK economy may need a “a longer period of below-trend growth” to bring inflation back down to the 2% target “with corresponding consequences for monetary policy” (in other words, monetary policy would need to remain tighter for longer).

Economic data due today include a final reading of Euro area CPI inflation in November  – the initial reading showed the headline rate falling to 2.4% from 2.9% in October – as well as housing starts and building permits in the US.