The euro and sterling remain under pressure against the dollar. They dipped to lows yesterday of $1.09 and $1.3020 respectively following firmer than expected US CPI inflation data for September, but both have recovered a touch since to trade at around $1.0940 and $1.3060 this morning. EURGBP remains confined to a relatively narrow range, trading at about £0.8375 this morning. UK GDP data released earlier were in line with expectations and have had little impact on the pound.
Yesterday’s Events
US bond yields closed lower yesterday, with 2-year yields down around 6bps, despite the firmer inflation data which saw Fed rate cut expectations pared back some more (about 37.5bps is now priced for the remainder of this year). German yields also nudged down a touch, while UK yields were marginally higher on the day. In equity markets, both European and US stocks closed slightly in the red, following solid gains in Wednesday’s session.
In the US, headline and core consumer prices rose by 0.2% and 0.3% month-on-month respectively in September, slightly ahead of the consensus forecast. This saw the annual rate of headline inflation nudge down to 2.4% from 2.5% in August, but the core inflation rate nudged up to 3.3% from 3.2%. The Fed expects core inflation to remain “sticky” over the closing months of 2024 before heading lower during the course of 2025.
The UK economy expanded by 0.2% month-on-month in August according to this morning’s GDP report, having recorded no growth at all in both June and July. GDP rose by 0.2% over the three months to August (from the three months to May), pointing to a moderation in the pace of growth in the third quarter – as expected by the Bank of England – after GDP increased by above-trend rates of 0.7% and 0.5% in Q1 and Q2 respectively.
The minutes of the ECB’s September monetary policy meeting, published yesterday, noted that the economic outlook for the Euro area had become “more concerning” and that “a faster pace of rate cuts would likely be appropriate if…downside risks to the growth outlook materialised.” The latest PMI data suggest downside risks to growth are materialising, with the ECB looking set to cut rates again next week.
The Day Ahead
Looking to the day ahead, the main economic data releases are producer prices and the University of Michigan survey of consumer confidence/inflation expectations in the US, while a few Fed 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
10 Oct 2024
Today's Talking Points 10.10.2024
Market Commentary
The market continues to pare back expectations for near-term Fed rate cuts – just around 40bps in total is now priced in for the final two meetings of this year, down from circa 75bps a short while ago – which is pushing up US bond yields and underpinning the dollar. The euro and sterling are trading at around $1.0940 and $1.3075 respectively this morning, ahead of US CPI inflation data later today, leaving EURGBP a touch lower at around £0.8365.
Yesterday’s Events
US bond yields moved up yesterday with 2- and 10-yields both rising by around 6bps, while equivalent UK and German yields were flat to marginally higher on the day. Equity markets had a positive session with European stocks adding around 0.7% and the S&P 500 in the US closing at a new all-time high.
The minutes of the Fed’s September monetary policy meeting show a “substantial majority” of members supported cutting interest rates by 50 basis points (to a range of 4.75% -5%) though “some would have preferred” a 25bps move. Looking forward, members believed it would “likely be appropriate” to lower rates further and to gradually “move toward a more neutral stance of policy over time”.
The Day Ahead
Today’s CPI inflation report in the US is expected to show headline and core consumer prices rose by 0.1% and 0.2% month-on-month respectively in September, which would push the annual rate of headline inflation down to 2.3% from 2.5% in August but leave the core rate unchanged at 3.2%.
Other economic data due today include weekly jobless claims and real hourly/weekly earnings in the US, while the ECB publishes the minutes of last month’s monetary policy meeting at which it lowered the deposit rate by a further 25bps.
Author: Brian Tim Moore
Tel: 1800 30 30 03 / +353 (0)1 790 0000
9 Oct 2024
Today's Talking Points 09.10.2024
Market Commentary
It remains fairly quiet in FX markets with the main currency pairs not much changed. The euro and sterling are trading at around $1.0960 and $1.3070 respectively against the dollar, a touch softer and unchanged respectively from this time yesterday morning, while EURGBP has retreated a little from the £0.84 level, trading at about £0.8385 this morning.
Yesterday’s Events
In government bond markets, yields are nudging ever so slightly lower after the sizeable jump seen over the second half of last week. Equity markets, meanwhile, had another mixed session with European stocks ending slightly lower but US indices advanced, the latter led by the Nasdaq which gained 1.5% while the S&P 500 closed within a whisker of another all-time high.
ECB member Vasle notes that “even if the ECB happens to decide to lower rates next week, that wouldn’t automatically mean another cut is coming in December.” The market begs to differ though – it fully expects the ECB to cut by 25bps next week and by 25bps again in December.
The US economy grew at a solid pace again in the third quarter, judging by the latest estimate from the Atlanta Fed. It puts the run-rate for GDP growth at 3.2%, much the same as the Q2 outturn (3%), driven once again by strength in consumer spending.
The Day Ahead
It is very quiet today in terms of economic data with little of note due for release. The Fed publishes the minutes of its recent monetary policy meeting, while a number of Fed and 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
8 Oct 2024
Today's Talking Points 08.10.2024
Market Commentary
The main currency pairs are not much changed following the sizeable enough moves seen last week. The euro is a touch firmer against the dollar but remains below the $1.10 level, trading at around $1.0980 this morning, and has also nudged up against sterling to £0.84. The pound has slipped against the US currency to trade at around $1.3070, well off its 2024 to data high of over $1.34 in late September
Yesterday’s Events
US bond yields continued to head north yesterday, as the market continued to reprice the outlook for US interest rates following Friday’s employment report, with 2-and 10-year yields rising by around 7-8bps. Yields have come back a bit in overnight trading, following some reassuring comments on interest rates from Fed members, with German and UK yields also nudging lower at the open today.
Equity markets had a mixed session. The S&P 500 in the US shed almost 1%, reversing the gains it made on Friday post the jobs report, while European stocks chalked up modest gains of less than half a percent.
Fed member Kugler says she “will support additional cuts in (interest rates) to move toward a more neutral policy stance over time,” which will ensure “we can continue making progress on inflation while avoiding an undesirable slowdown in employment growth and economic expansion.”
ECB’s Villeroy says interest rates will “quite probably” be cut at this month’s meeting (18th), noting that the central bank “must pay attention to the risk of undershooting our (inflation) objective due to weak growth and a restrictive monetary policy for too long.” Market expectations for a 25bps cut next week, and a further 25bps reduction at the December meeting, remain intact.
The Day Ahead
It is quiet enough on the economic data front today. The trade balance and small business optimism index are due in the US, while the Atlanta Fed will publish its latest estimate of the run-rate for US GDP growth in Q3.
Author: Brian Tim Moore
Tel: 1800 30 30 03 / +353 (0)1 790 0000
7 Oct 2024
Today's Talking Points 07.10.2024
Market Commentary
The dollar advanced against the euro and sterling following Friday’s much stronger than expected US jobs data for September, although its gains were relatively modest. The euro is trading at around $1.0960 against the US currency this morning, down a bit more than half a cent from immediately prior to the release of the data – and the first time it’s been below the $1.10 level since the middle of August – while sterling fell to a low for the week of $1.3070 post the data but has partially recovered to trade at around $1.3110 at the start of play today. EURGBP has drifted down further from Thursday’s intra-week high of over £0.8434 but remains off its 2024 low of £0.8311 set early last week, trading at around £0.8365 this morning.
Yesterday’s Events
The jobs data has prompted a marked reassessment of Fed rate cut expectations. The market is now pricing in just 46bps of cuts by the end of this year, down from 60bps before the data, and about 145bps in total by the end of 2025, down from circa 175bps. This in turn has contributed to a spike in US bond yields, with 2- and 10-year yields rising by 20bps and 15bps respectively on Friday (the latter now just shy of 4% having risen by circa 40bps since mid-September). UK and German yields followed some of the way higher, with 2- year yields rising by 15bps and 10bps respectively and 10-year yields up 10bps and 5bps respectively.
The US economy added 254k jobs in September, well ahead of the forecast increase of 150k, while the unemployment rate fell for a second month in a row to stand at 4.1%. Wage growth also picked up last month, with hourly earnings rising by 4.0% year-on-year after increasing by 3.9% y-o-y in August. The data will reinforce Fed Chair Powell’s view, expressed at the start of last week, that the central bank does not need to be in a hurry to cut rates “fast”.
The Day Ahead
It is quiet enough today in terms of economic data with retail sales in the Euro area and consumer credit in the US. Looking out over the week, the main releases include US CPI and PPI – both for September – on Thursday and Friday respectively, and UK GDP for August on Friday also. The Fed releases the minutes of its September monetary policy meeting on Wednesday.
Dealer Comments
Today's Talking Points 11.10.2024
Market Commentary
The euro and sterling remain under pressure against the dollar. They dipped to lows yesterday of $1.09 and $1.3020 respectively following firmer than expected US CPI inflation data for September, but both have recovered a touch since to trade at around $1.0940 and $1.3060 this morning. EURGBP remains confined to a relatively narrow range, trading at about £0.8375 this morning. UK GDP data released earlier were in line with expectations and have had little impact on the pound.
Yesterday’s Events
US bond yields closed lower yesterday, with 2-year yields down around 6bps, despite the firmer inflation data which saw Fed rate cut expectations pared back some more (about 37.5bps is now priced for the remainder of this year). German yields also nudged down a touch, while UK yields were marginally higher on the day. In equity markets, both European and US stocks closed slightly in the red, following solid gains in Wednesday’s session.
In the US, headline and core consumer prices rose by 0.2% and 0.3% month-on-month respectively in September, slightly ahead of the consensus forecast. This saw the annual rate of headline inflation nudge down to 2.4% from 2.5% in August, but the core inflation rate nudged up to 3.3% from 3.2%. The Fed expects core inflation to remain “sticky” over the closing months of 2024 before heading lower during the course of 2025.
The UK economy expanded by 0.2% month-on-month in August according to this morning’s GDP report, having recorded no growth at all in both June and July. GDP rose by 0.2% over the three months to August (from the three months to May), pointing to a moderation in the pace of growth in the third quarter – as expected by the Bank of England – after GDP increased by above-trend rates of 0.7% and 0.5% in Q1 and Q2 respectively.
The minutes of the ECB’s September monetary policy meeting, published yesterday, noted that the economic outlook for the Euro area had become “more concerning” and that “a faster pace of rate cuts would likely be appropriate if…downside risks to the growth outlook materialised.” The latest PMI data suggest downside risks to growth are materialising, with the ECB looking set to cut rates again next week.
The Day Ahead
Looking to the day ahead, the main economic data releases are producer prices and the University of Michigan survey of consumer confidence/inflation expectations in the US, while a few Fed members are scheduled to speak over the course of the day.
10 Oct 2024
Today's Talking Points 10.10.2024
Market Commentary
The market continues to pare back expectations for near-term Fed rate cuts – just around 40bps in total is now priced in for the final two meetings of this year, down from circa 75bps a short while ago – which is pushing up US bond yields and underpinning the dollar. The euro and sterling are trading at around $1.0940 and $1.3075 respectively this morning, ahead of US CPI inflation data later today, leaving EURGBP a touch lower at around £0.8365.
Yesterday’s Events
US bond yields moved up yesterday with 2- and 10-yields both rising by around 6bps, while equivalent UK and German yields were flat to marginally higher on the day. Equity markets had a positive session with European stocks adding around 0.7% and the S&P 500 in the US closing at a new all-time high.
The minutes of the Fed’s September monetary policy meeting show a “substantial majority” of members supported cutting interest rates by 50 basis points (to a range of 4.75% -5%) though “some would have preferred” a 25bps move. Looking forward, members believed it would “likely be appropriate” to lower rates further and to gradually “move toward a more neutral stance of policy over time”.
The Day Ahead
Today’s CPI inflation report in the US is expected to show headline and core consumer prices rose by 0.1% and 0.2% month-on-month respectively in September, which would push the annual rate of headline inflation down to 2.3% from 2.5% in August but leave the core rate unchanged at 3.2%.
Other economic data due today include weekly jobless claims and real hourly/weekly earnings in the US, while the ECB publishes the minutes of last month’s monetary policy meeting at which it lowered the deposit rate by a further 25bps.
9 Oct 2024
Today's Talking Points 09.10.2024
Market Commentary
It remains fairly quiet in FX markets with the main currency pairs not much changed. The euro and sterling are trading at around $1.0960 and $1.3070 respectively against the dollar, a touch softer and unchanged respectively from this time yesterday morning, while EURGBP has retreated a little from the £0.84 level, trading at about £0.8385 this morning.
Yesterday’s Events
In government bond markets, yields are nudging ever so slightly lower after the sizeable jump seen over the second half of last week. Equity markets, meanwhile, had another mixed session with European stocks ending slightly lower but US indices advanced, the latter led by the Nasdaq which gained 1.5% while the S&P 500 closed within a whisker of another all-time high.
ECB member Vasle notes that “even if the ECB happens to decide to lower rates next week, that wouldn’t automatically mean another cut is coming in December.” The market begs to differ though – it fully expects the ECB to cut by 25bps next week and by 25bps again in December.
The US economy grew at a solid pace again in the third quarter, judging by the latest estimate from the Atlanta Fed. It puts the run-rate for GDP growth at 3.2%, much the same as the Q2 outturn (3%), driven once again by strength in consumer spending.
The Day Ahead
It is very quiet today in terms of economic data with little of note due for release. The Fed publishes the minutes of its recent monetary policy meeting, while a number of Fed and ECB members are scheduled to speak over the course of the day.
8 Oct 2024
Today's Talking Points 08.10.2024
Market Commentary
The main currency pairs are not much changed following the sizeable enough moves seen last week. The euro is a touch firmer against the dollar but remains below the $1.10 level, trading at around $1.0980 this morning, and has also nudged up against sterling to £0.84. The pound has slipped against the US currency to trade at around $1.3070, well off its 2024 to data high of over $1.34 in late September
Yesterday’s Events
US bond yields continued to head north yesterday, as the market continued to reprice the outlook for US interest rates following Friday’s employment report, with 2-and 10-year yields rising by around 7-8bps. Yields have come back a bit in overnight trading, following some reassuring comments on interest rates from Fed members, with German and UK yields also nudging lower at the open today.
Equity markets had a mixed session. The S&P 500 in the US shed almost 1%, reversing the gains it made on Friday post the jobs report, while European stocks chalked up modest gains of less than half a percent.
Fed member Kugler says she “will support additional cuts in (interest rates) to move toward a more neutral policy stance over time,” which will ensure “we can continue making progress on inflation while avoiding an undesirable slowdown in employment growth and economic expansion.”
ECB’s Villeroy says interest rates will “quite probably” be cut at this month’s meeting (18th), noting that the central bank “must pay attention to the risk of undershooting our (inflation) objective due to weak growth and a restrictive monetary policy for too long.” Market expectations for a 25bps cut next week, and a further 25bps reduction at the December meeting, remain intact.
The Day Ahead
It is quiet enough on the economic data front today. The trade balance and small business optimism index are due in the US, while the Atlanta Fed will publish its latest estimate of the run-rate for US GDP growth in Q3.
7 Oct 2024
Today's Talking Points 07.10.2024
Market Commentary
The dollar advanced against the euro and sterling following Friday’s much stronger than expected US jobs data for September, although its gains were relatively modest. The euro is trading at around $1.0960 against the US currency this morning, down a bit more than half a cent from immediately prior to the release of the data – and the first time it’s been below the $1.10 level since the middle of August – while sterling fell to a low for the week of $1.3070 post the data but has partially recovered to trade at around $1.3110 at the start of play today. EURGBP has drifted down further from Thursday’s intra-week high of over £0.8434 but remains off its 2024 low of £0.8311 set early last week, trading at around £0.8365 this morning.
Yesterday’s Events
The jobs data has prompted a marked reassessment of Fed rate cut expectations. The market is now pricing in just 46bps of cuts by the end of this year, down from 60bps before the data, and about 145bps in total by the end of 2025, down from circa 175bps. This in turn has contributed to a spike in US bond yields, with 2- and 10-year yields rising by 20bps and 15bps respectively on Friday (the latter now just shy of 4% having risen by circa 40bps since mid-September). UK and German yields followed some of the way higher, with 2- year yields rising by 15bps and 10bps respectively and 10-year yields up 10bps and 5bps respectively.
The US economy added 254k jobs in September, well ahead of the forecast increase of 150k, while the unemployment rate fell for a second month in a row to stand at 4.1%. Wage growth also picked up last month, with hourly earnings rising by 4.0% year-on-year after increasing by 3.9% y-o-y in August. The data will reinforce Fed Chair Powell’s view, expressed at the start of last week, that the central bank does not need to be in a hurry to cut rates “fast”.
The Day Ahead
It is quiet enough today in terms of economic data with retail sales in the Euro area and consumer credit in the US. Looking out over the week, the main releases include US CPI and PPI – both for September – on Thursday and Friday respectively, and UK GDP for August on Friday also. The Fed releases the minutes of its September monetary policy meeting on Wednesday.