Quiet start to the week

It has been a quiet enough start to the week in FX markets. The euro is little changed against the dollar this morning, trading at $1.09, but has drifted down a little against sterling to around 85.6p. The pound is marginally firmer against the dollar at about $1.2740.

Government bond yields edged down a touch yesterday, not surprisingly perhaps given last week’s sharp jump in yields, while equity markets had a positive session with European stocks advancing by almost 1% and US indices adding modestly to last week’s gains.

Public sector borrowing in December in the UK was around 50% less than in December 2022 according to data released earlier this morning, and the lowest December borrowing since 2019. Weekend reports suggested that the Chancellor, Jeremy Hunt, will have “room” to cut personal taxes in the March budget, ahead of an expected general election in the second half of this year.

In the US, the Conference Board’s leading indicator of economic activity fell again in December and continues “to signal underlying weakness in the economy.” The Conference Board expects “GDP growth to turn negative in Q2 and Q3 of 2024 but…to recover late in the year,” though this is at odds with the consensus forecast which doesn’t expect a recession this year.

Economic data is thin enough on the ground today, with Euro area consumer confidence the main release of note, ahead of the closely followed PMIs for the main economies tomorrow.