The euro and sterling advanced against the dollar yesterday, following the Japanese yen higher with the latter gaining more than 1% against the US currency buoyed by speculation about interest rate hikes by the Bank of Japan. The euro rose to over $1.05 for a time but has slipped to around $1.0480 this morning, still well-off Wednesday’s low of $1.04, while sterling has strengthened to $1.2660, up about a cent from Wednesday’s low and a new 2025 to date high to boot. EURGBP has been confined to a very narrow range for much of this week and is trading at £0.8280 this morning. For the day ahead, the focus will be on flash PMIs for February in the main economies, with the readings for Germany and France released already this morning something of mixed bag (stronger than expected for the former, weaker than expected for the latter).
Yesterday’s Events
It was relatively quiet in bond markets yesterday with yields generally marginally lower on day. In equity markets, the S&P 500 retreated from Wednesday’s record high, shedding almost 0.5%, while European stocks ended flat.
Retails sales in the UK rebounded strongly in January according to data released earlier this morning, increasing by 1.7% following a decline of 0.6% in December. Over the three months to January sales volumes were still down 0.6% from the three months to October, though they were ahead by almost 1.5% on the same period a year earlier.
Fed member Musalem says interest rates should remain “modestly restrictive” until inflation converges further towards its 2% target, at which point they can be “gradually reduced” to a more neutral level.
The Day Ahead
For the day ahead, as well as the flash PMIs, other data due include consumer confidence and existing home sales in the US. Meanwhile, Germany goes to the polls over the weekend, which could have some bearing on markets at the start of next week.
Author: Brian Tim Moore
Tel: 1800 30 30 03 / +353 (0)1 790 0000
20 Feb 2025
Today's Talking Points 20.02.2025
Market Commentary
Despite some hawkish ECB commentary yesterday, which pushed up euro area bond yields relative to US yields, the euro lost ground to the dollar, hitting a low for the day of around $1.04. Trump’s latest tariffs threat appeared to weigh on the currency, and also on sterling which was off around half a cent against the dollar at one stage. The euro is firmer this morning though, trading at about $1.0435, as is the pound which is hovering just above $1.26. This leaves EURGBP at around £0.8280, little changed from where it was trading yesterday morning.
Yesterday’s Events
In bond markets, German yields closed 5-6bps higher after ECB member Schnabel said it may soon be time to pause or halt interest rate cuts. UK yields rose by something similar, while US yields in contrast ended slightly lower on the day. In equity markets, Trump’s tariffs threat weighed on European stocks, which shed the best part of 1.5%, while US indices chalked up very modest gains.
In her comments, Schnabel said that, as monetary policy “is getting closer to no longer being restrictive, we are getting closer to the point where we may have to pause or halt our rate cuts.” She noted that both services inflation and wage growth “are still at an uncomfortably high level”, and while “our projections foresee a deceleration of both…this still needs to materialise.”
The minutes of last month’s Fed monetary policy meeting published yesterday evening contained no surprises. They noted that reduced downside risks to the outlook for the labour market and economic activity, increased upside risks to the outlook for inflation, and uncertainty regarding the economic effects of potential government policies, were reasons “to take a careful approach in considering” further interest rates cuts.
The Day Ahead
Looking to the day ahead, it is quiet enough again on the data front with weekly jobless claims due in the US and consumer confidence and construction output scheduled in the Euro area. A number of Fed/ECB members are due to speak during the course of the day.
Author: Brian Tim Moore
Tel: 1800 30 30 03 / +353 (0)1 790 0000
19 Feb 2025
Today's Talking Points 19.02.2025
Market Commentary
The main currency pairs largely treaded water yesterday with a slight weakening bias to the euro against the dollar and sterling and the latter holding its own against the US currency . This morning’s CPI data in the UK – which showed a further increase in headline inflation January – were broadly in line with expectations and have had little impact on the pound, while Trump’s latest tariffs warning – 25% tariffs on autos, chips and pharmaceuticals – delivered last night has left markets unmoved for the most part. The euro is trading at about $1.0450 and £0.8280 against the dollar and sterling respectively this morning, while the pound is hovering just above $1.26 level against the dollar.
Yesterday’s Events
In bond markets, US yields played catch-up with Monday’s increase in yields elsewhere (US markets were closed at the start of the week) with benchmark 10-year yields ending about 7bps higher, while equivalent UK and German yields were marginally higher to flat on the day. In equity markets, European stocks chalked up further albeit modest gains, while the S&P 500 added about 0.3% to close at a new record high.
This morning’s CPI release in the UK showed the annual rate of headline inflation rose to 3% in January (from 2.5% in December), a touch above the consensus forecast, while core inflation (which excludes energy and food prices) increased to 3.7% (from 3.2%), in line with expectations. Core goods inflation picked up for a fourth month running to 1.6%, while core services reaccelerated to 5% (from 4.4% in December) largely as a result of a smaller decline in airfares this January than in January 2024. According to its latest forecasts, the Bank of England expects headline inflation to reach 3.8% by the third quarter of this year (mainly due to higher energy prices) before starting to fall back again by year-end, which is why it has clearly indicated that it is adopting a gradual approach to lowering interest rates.
Fed member Daly says monetary policy “needs to remain restrictive until we see that we are really continuing to make progress on inflation,” adding that there’s “no reason to be discouraged about the progress on inflation, it just is going to take longer than anyone wants.” Her comments echo those of other colleagues and indicate the Fed remains in no hurry to lower interest rates.
The Day Ahead
It is quiet for the rest of the day in terms of economic data, with housing starts in the US the only release of any note, while the Fed publishes the minutes of last month’s monetary policy meeting.
Author: Brian Tim Moore
Tel: 1800 30 30 03 / +353 (0)1 790 0000
18 Feb 2025
Today's Talking Points 18.02.2025
Market Commentary
Sterling advanced against both the dollar and the euro yesterday and is largely holding onto these gains following the release a short while ago of the latest labour market report in the UK – which was broadly in line with expectations – trading at about $1.2620 and £0.83 respectively. The euro has drifted a little lower against the dollar, retreating from Friday’s high of over $1.05, and is trading at about $1.0465 this morning.
Yesterday’s Events
European bond yields and equity markets both rose yesterday – with the prospect of increased defence spending by EU governments contributing to both. German 10-year yields rose by 6bps, while equivalent yields in the UK increased by 4bps, with both nudging higher again at the start of play today. European equity markets advanced by around 0.5%, adding to last week’s gains. (Both US bond and equity markets were closed for a public holiday yesterday.
This morning’s labour market data in the UK showed employment rose by 0.3% (or +107k) q-o-q in the final quarter of 2024 according to the Labour Force Survey, though the unemployment rate nudged up to 4.4% (from 4.3% in Q3) largely reflecting a further decline in the inactivity rate. The annual rate of growth in regular average weekly earnings picked up in the three months to December, to 5.9%, a full percentage point higher than in the three months to September. The strength in earnings growth will not be a surprise to the Bank of England, but it does leave it in an uncomfortable position as it contemplates further reductions in interest rates.
Fed member Waller says “inflation is still meaningfully above our target, and progress (in lowering it) has been excruciatingly slow over the last year”, hence it is “appropriate to pause rate cuts” and maintain a restrictive monetary policy stance for now.
The Day Ahead
It is relatively quiet in terms of economic data for the rest of the day, with the ZEW Index of investor sentiment due in the Euro area and the latest housing market index due in the US. A number of Fed/ECB members are scheduled to speak over the course of the day.
Author: Brian Tim Moore
Tel: 1800 30 30 03 / +353 (0)1 790 0000
13 Feb 2025
Today's Talking Points 13.02.2025
Market Commentary
Yesterday’s US inflation data were stronger than expected, prompting an increase in bond yields as expectations for any Fed rate cuts were pared back and pushed out, though the dollar failed to progress. Indeed the euro closed higher against the US currency on the back of potentially positive developments in relation to the war in Ukraine – Donald Trump said talks with Russia will begin “immediately” aimed at ending the conflict – and has advanced further to around $1.0420 this morning. Sterling has also gained ground against the dollar, to just shy of $1.25, helped by better than expected GDP data in the UK released a short while ago, while EURGBP is a touch firmer trading at £0.8340.
Yesterday’s Events
In bond markets, the stronger than forecast inflation data saw US yields end 7-8ps higher on the day, with the market now essentially expecting the Fed to cut rates just once in 2025 towards the end of the year, while German and UK yields followed some of the way higher, rising by 4-5bps. In equity markets, US indices ended in the red, but European stocks chalked up modest gains, helped by the news in relation to Ukraine. The latter also saw oil prices fall back, with Brent crude below $75 p/b this morning, down from Tuesday’s close of $77.
Regarding the US inflation data, headline and core consumer prices rose by 0.5% and 0.4% respectively in January, both ahead of the consensus forecast. This pushed up the headline rate of CPI inflation to 3% from 2.9% in December, while the core inflation nudged up to 3.3% from 3.2%. Fed Chair Powell said the data showed there’s more work to do to return inflation to target and said the central bank will maintain its restrictive monetary policy stance.
This morning’s GDP data in the UK show the economy expanded by 0.4% in December, stronger than expected (+0.1%), driven mainly by growth in the services sector. For Q4 (Oct-Dec), GDP grew by just 0.1%, having stagnated in the third quarter, but was up 1.4% on Q4 2023. For 2024 as a whole, GDP growth averaged 0.9%, a mild acceleration from 0.4% in 2023.
The Day Ahead
Looking to the day ahead, producer price inflation and the regular weekly jobless claims are due in the US, while industrial production is scheduled in the Euro area. There are also a few ECB members due on the wires.
Dealer Comments
Today's Talking Points 21.02.2025
Market Commentary
The euro and sterling advanced against the dollar yesterday, following the Japanese yen higher with the latter gaining more than 1% against the US currency buoyed by speculation about interest rate hikes by the Bank of Japan. The euro rose to over $1.05 for a time but has slipped to around $1.0480 this morning, still well-off Wednesday’s low of $1.04, while sterling has strengthened to $1.2660, up about a cent from Wednesday’s low and a new 2025 to date high to boot. EURGBP has been confined to a very narrow range for much of this week and is trading at £0.8280 this morning. For the day ahead, the focus will be on flash PMIs for February in the main economies, with the readings for Germany and France released already this morning something of mixed bag (stronger than expected for the former, weaker than expected for the latter).
Yesterday’s Events
It was relatively quiet in bond markets yesterday with yields generally marginally lower on day. In equity markets, the S&P 500 retreated from Wednesday’s record high, shedding almost 0.5%, while European stocks ended flat.
Retails sales in the UK rebounded strongly in January according to data released earlier this morning, increasing by 1.7% following a decline of 0.6% in December. Over the three months to January sales volumes were still down 0.6% from the three months to October, though they were ahead by almost 1.5% on the same period a year earlier.
Fed member Musalem says interest rates should remain “modestly restrictive” until inflation converges further towards its 2% target, at which point they can be “gradually reduced” to a more neutral level.
The Day Ahead
For the day ahead, as well as the flash PMIs, other data due include consumer confidence and existing home sales in the US. Meanwhile, Germany goes to the polls over the weekend, which could have some bearing on markets at the start of next week.
20 Feb 2025
Today's Talking Points 20.02.2025
Market Commentary
Despite some hawkish ECB commentary yesterday, which pushed up euro area bond yields relative to US yields, the euro lost ground to the dollar, hitting a low for the day of around $1.04. Trump’s latest tariffs threat appeared to weigh on the currency, and also on sterling which was off around half a cent against the dollar at one stage. The euro is firmer this morning though, trading at about $1.0435, as is the pound which is hovering just above $1.26. This leaves EURGBP at around £0.8280, little changed from where it was trading yesterday morning.
Yesterday’s Events
In bond markets, German yields closed 5-6bps higher after ECB member Schnabel said it may soon be time to pause or halt interest rate cuts. UK yields rose by something similar, while US yields in contrast ended slightly lower on the day. In equity markets, Trump’s tariffs threat weighed on European stocks, which shed the best part of 1.5%, while US indices chalked up very modest gains.
In her comments, Schnabel said that, as monetary policy “is getting closer to no longer being restrictive, we are getting closer to the point where we may have to pause or halt our rate cuts.” She noted that both services inflation and wage growth “are still at an uncomfortably high level”, and while “our projections foresee a deceleration of both…this still needs to materialise.”
The minutes of last month’s Fed monetary policy meeting published yesterday evening contained no surprises. They noted that reduced downside risks to the outlook for the labour market and economic activity, increased upside risks to the outlook for inflation, and uncertainty regarding the economic effects of potential government policies, were reasons “to take a careful approach in considering” further interest rates cuts.
The Day Ahead
Looking to the day ahead, it is quiet enough again on the data front with weekly jobless claims due in the US and consumer confidence and construction output scheduled in the Euro area. A number of Fed/ECB members are due to speak during the course of the day.
19 Feb 2025
Today's Talking Points 19.02.2025
Market Commentary
The main currency pairs largely treaded water yesterday with a slight weakening bias to the euro against the dollar and sterling and the latter holding its own against the US currency . This morning’s CPI data in the UK – which showed a further increase in headline inflation January – were broadly in line with expectations and have had little impact on the pound, while Trump’s latest tariffs warning – 25% tariffs on autos, chips and pharmaceuticals – delivered last night has left markets unmoved for the most part. The euro is trading at about $1.0450 and £0.8280 against the dollar and sterling respectively this morning, while the pound is hovering just above $1.26 level against the dollar.
Yesterday’s Events
In bond markets, US yields played catch-up with Monday’s increase in yields elsewhere (US markets were closed at the start of the week) with benchmark 10-year yields ending about 7bps higher, while equivalent UK and German yields were marginally higher to flat on the day. In equity markets, European stocks chalked up further albeit modest gains, while the S&P 500 added about 0.3% to close at a new record high.
This morning’s CPI release in the UK showed the annual rate of headline inflation rose to 3% in January (from 2.5% in December), a touch above the consensus forecast, while core inflation (which excludes energy and food prices) increased to 3.7% (from 3.2%), in line with expectations. Core goods inflation picked up for a fourth month running to 1.6%, while core services reaccelerated to 5% (from 4.4% in December) largely as a result of a smaller decline in airfares this January than in January 2024. According to its latest forecasts, the Bank of England expects headline inflation to reach 3.8% by the third quarter of this year (mainly due to higher energy prices) before starting to fall back again by year-end, which is why it has clearly indicated that it is adopting a gradual approach to lowering interest rates.
Fed member Daly says monetary policy “needs to remain restrictive until we see that we are really continuing to make progress on inflation,” adding that there’s “no reason to be discouraged about the progress on inflation, it just is going to take longer than anyone wants.” Her comments echo those of other colleagues and indicate the Fed remains in no hurry to lower interest rates.
The Day Ahead
It is quiet for the rest of the day in terms of economic data, with housing starts in the US the only release of any note, while the Fed publishes the minutes of last month’s monetary policy meeting.
18 Feb 2025
Today's Talking Points 18.02.2025
Market Commentary
Sterling advanced against both the dollar and the euro yesterday and is largely holding onto these gains following the release a short while ago of the latest labour market report in the UK – which was broadly in line with expectations – trading at about $1.2620 and £0.83 respectively. The euro has drifted a little lower against the dollar, retreating from Friday’s high of over $1.05, and is trading at about $1.0465 this morning.
Yesterday’s Events
European bond yields and equity markets both rose yesterday – with the prospect of increased defence spending by EU governments contributing to both. German 10-year yields rose by 6bps, while equivalent yields in the UK increased by 4bps, with both nudging higher again at the start of play today. European equity markets advanced by around 0.5%, adding to last week’s gains. (Both US bond and equity markets were closed for a public holiday yesterday.
This morning’s labour market data in the UK showed employment rose by 0.3% (or +107k) q-o-q in the final quarter of 2024 according to the Labour Force Survey, though the unemployment rate nudged up to 4.4% (from 4.3% in Q3) largely reflecting a further decline in the inactivity rate. The annual rate of growth in regular average weekly earnings picked up in the three months to December, to 5.9%, a full percentage point higher than in the three months to September. The strength in earnings growth will not be a surprise to the Bank of England, but it does leave it in an uncomfortable position as it contemplates further reductions in interest rates.
Fed member Waller says “inflation is still meaningfully above our target, and progress (in lowering it) has been excruciatingly slow over the last year”, hence it is “appropriate to pause rate cuts” and maintain a restrictive monetary policy stance for now.
The Day Ahead
It is relatively quiet in terms of economic data for the rest of the day, with the ZEW Index of investor sentiment due in the Euro area and the latest housing market index due in the US. A number of Fed/ECB members are scheduled to speak over the course of the day.
13 Feb 2025
Today's Talking Points 13.02.2025
Market Commentary
Yesterday’s US inflation data were stronger than expected, prompting an increase in bond yields as expectations for any Fed rate cuts were pared back and pushed out, though the dollar failed to progress. Indeed the euro closed higher against the US currency on the back of potentially positive developments in relation to the war in Ukraine – Donald Trump said talks with Russia will begin “immediately” aimed at ending the conflict – and has advanced further to around $1.0420 this morning. Sterling has also gained ground against the dollar, to just shy of $1.25, helped by better than expected GDP data in the UK released a short while ago, while EURGBP is a touch firmer trading at £0.8340.
Yesterday’s Events
In bond markets, the stronger than forecast inflation data saw US yields end 7-8ps higher on the day, with the market now essentially expecting the Fed to cut rates just once in 2025 towards the end of the year, while German and UK yields followed some of the way higher, rising by 4-5bps. In equity markets, US indices ended in the red, but European stocks chalked up modest gains, helped by the news in relation to Ukraine. The latter also saw oil prices fall back, with Brent crude below $75 p/b this morning, down from Tuesday’s close of $77.
Regarding the US inflation data, headline and core consumer prices rose by 0.5% and 0.4% respectively in January, both ahead of the consensus forecast. This pushed up the headline rate of CPI inflation to 3% from 2.9% in December, while the core inflation nudged up to 3.3% from 3.2%. Fed Chair Powell said the data showed there’s more work to do to return inflation to target and said the central bank will maintain its restrictive monetary policy stance.
This morning’s GDP data in the UK show the economy expanded by 0.4% in December, stronger than expected (+0.1%), driven mainly by growth in the services sector. For Q4 (Oct-Dec), GDP grew by just 0.1%, having stagnated in the third quarter, but was up 1.4% on Q4 2023. For 2024 as a whole, GDP growth averaged 0.9%, a mild acceleration from 0.4% in 2023.
The Day Ahead
Looking to the day ahead, producer price inflation and the regular weekly jobless claims are due in the US, while industrial production is scheduled in the Euro area. There are also a few ECB members due on the wires.