US bond yields reverse course

The euro and sterling both made some modest gains against the dollar last week and kick off this week trading at around $1.0650 and $1.2050 respectively, in turn leaving the single currency-pound exchange rate hovering in and around 88.5p

It was something of a week of two halves last week for US 10-year yields, which rose to almost 4.10% at one point before reversing course to end little changed overall at 3.95%. German 10-year yields also edged down late last week and are lower again in early trading this morning at around 2.65%

Fed Chair Powell testifies to Congress this week (Tuesday and Wednesday) on the outlook for the US economy and monetary policy. He is likely to reiterate that further interest rate increases remain appropriate and that monetary policy needs to remain “restrictive” for some time

ECB President Christine Lagarde says “it is very likely that we will raise interest rates by 50 basis points” at this month’s meeting (16th), noting that while headline inflation in the Euro area has come down recently, “core inflation, which…excludes energy and food, is too high”

The key economic release this week is the February employment report in the US on Friday – the consensus expects the economy to have posted job gains of almost 220k last month with unemployment remaining at 3.4% and hourly earnings growth ticking up to 4.7% year-on-year (from 4.4% in January)

Other data of note include GDP for January in the UK, also scheduled for Friday