Sterling regains some ground

Having underperformed since last week’s Bank of England rate cut, sterling regained some ground during yesterday’s session. This sees it trading at around $1.2770 against the dollar, and at about 85.6p versus the euro, at the start of play today. Stronger than expected jobless claims data in the US saw the euro dip below $1.09 against the dollar, but it subsequently rebounded and is trading at around $1.0930 this morning.

The jobless claims data helped assuage concerns about the health of the labour market in the US, prompting a strong rally in stocks with the S&P 500 gaining almost 2.5% and European equities reversing earlier losses to end broadly flat on the day.

US government bond yields continued their retreat from last Monday’s lows, with the 10-year yield rising by another 5bps to close just shy of 4%, while German and UK yields were flat to marginally higher on the day.

The number of new jobless claimants in the US fell quite sharply last week, according to yesterday’s data, more than reversing the previous weeks’ increase.  The 4-week average (which smooths out the week-to-week volatility in the data) continued to creep higher but remains at  relatively low levels.

Fed member Schmid says “the labor market still appears healthy” even though “last week’s employment report for July “led many to question (its) resilience,” adding that the path for interest rates ahead “will be determined by the data and the strength of the economy.”

It is an extremely quiet end to the week in terms of economic data with little or nothing of note due today.