Sterling marginally firmer

It is quiet enough in FX markets with the main currency pairs not a whole lot changed from yesterday morning. The euro is a little softer against the dollar trading at around  $1.1040, while sterling is a touch  firmer against the US currency at about $1.31 following this morning’s UK labour market data, leaving EURGBP marginally lower trading at about £0.8430.

Government bond yields nudged lower yesterday led by a decline in UK yields (which were about 5-7bps lower), while equity markets recovered some ground, having fallen sharply last week, with European stocks adding almost 1% and US indices a bit more than 1%.

Oil prices have moved down notably over the past week, with Brent crude falling by around $6 per barrel to $71.5. The decline in prices will put further downward pressure on headline inflation rates, which have fallen close to target (2%) in the main economies.

In the UK, employment rose and the unemployment rate fell (to 4.1%) over the three months to July, according to this morning’s labour market data, while wage growth continued to ease. The annual increase in average weekly earnings (excluding bonuses) fell to 5.1% from 5.4% in the three months to June, while private sector earnings growth – which the Bank of England (BoE) is watching closely – fell to 4.9% (from 5.3%). The market is still pricing in little chance of a rate cut at this month’s meeting, but fully expects the BoE to lower rates by 25bps at its following meeting in November.

Looking to the day ahead, it is very quiet economic-data wise with the small business optimism index in the US the only release of note.