Sterling lower this morning

The dollar was under pressure for much of yesterday’s session, notwithstanding quite a sharp sell-off in equity markets, with EURUSD and GBPUSD trading up to intra-day highs of circa $1.1660 and $1.3215 respectively. Sterling in particular has come back a bit since though, with media reports that the Chancellor, Rachel Reeves, has abandoned ‘plans’ to raise income tax rates in the budget later this month weighing on the currency (and on the UK bond market), with the pound down at around $1.3140 this morning and weakening to over £0.8850 against the euro. The single currency is managing to hold onto most of yesterday’s gains against the dollar, trading at around $1.1635 at the start of play today.

 UK government bond yields have spiked sharply higher at the open today amid renewed concerns about the outlook for the UK’s public finances, with 10- and 30-year yields rising by around 10-12bps. US and German bond yields are edging up again this morning, having closed slightly higher yesterday as well.

 US stocks led yesterday’s decline in equity markets. The Nasdaq shed more than 2% – bringing its decline over the past couple of weeks to almost 5% as concerns about stretched AI-related valuations have weighed on the index – and the S&P 500 was off almost 2%. European stocks are down more than 0.5% this morning, having shed around 1% yesterday, while the UK’s FTSE is about 1% lower.

 Fed member Daly says she’s keeping an “open mind” regarding next month’s monetary policy meeting, saying there’s still more time to gather information before deciding whether interest rates should be lowered again on not. The differing views among Fed members has seen the market pare back the chances of a rate cut next month, which are now at around 50/50.

It’s quiet again today on the economic data front with GDP and employment for Q3  in the Euro area the only releases of note. We will also hear from a few ECB and Fed members over the course of the day.