Sterling a little weaker

With the market pricing in the Bank of England cutting interest rates earlier and by more than previously anticipated next year, the pound is a little lower against both the euro and the dollar trading at around 87p and $1.2270 respectively. The euro has also slipped against the US currency to trade at about $1.0680 this morning.

Sovereign bond markets remain quite volatile with Monday’s increase in yields largely reversed yesterday. UK 10-year yields led the decline falling by around 10bps to 4.27%, while equivalent US and German yields closed at 4.57% and 2.65% respectively.

Oil prices continue to drift lower notwithstanding the ongoing conflict in the Middle East. Brent crude has fallen to just under $82 per barrel, down from almost $95 p/b in mid-October after the conflict erupted.

ECB Chief Economist Philip Lane says the central bank’s “current focus” is on holding interest rates where they are, noting the progress that has been made in reducing inflation this year but “that it will remain around 3%…for quite a while, so it’s going to take a period of time before we see more progress toward the target.”

Fed member Logan says “we’ve seen some welcome progress with respect to inflation, but inflation still remains too high,” adding that “for me, the core question is whether financial conditions that we’re seeing today are sufficiently restrictive to return inflation to 2% in both a timely and sustainable way.”

Economic data due today include Euro area retail sales and the ECB’s latest survey of consumers’ inflation expectations, while there is a another heavy schedule of Fed speakers.