Latest data on Covid cases in the UK suggests the current new wave ‘may’ have peaked, as the Pound recovered sharply on Thursday across the board. Sterling also extended its gains against the Euro following a rather ‘dovish’ tone in the ECB’s statement and comments from Christine Lagarde at the press conference. Sterling has now rallied 1.5% from this week’s low of EUR 1.1530 as investor confidence in the UK economy appears to be back on track after a bad week politically for PM Boris Johnson and his government. With the Pound holding above $1.3750 in Asian markets overnight, we opened at the upper end of the range seen this week. Latest UK retail sales data beat consensus (+0.5%, expected +0.4%).

Risk on sentiment returned as stock/indices recovered any major losses this week, the Dollar weakening across the board with exception to the Euro and Yen. US policymakers remain hopeful of getting US President Joe Biden’s infrastructure spending bill passed through the house, despite being rejected at the opening debate. July manufacturing and market services PMI’s are released at 2.45pm.

The ECB confirmed that they are in no rush to raise interest rates. Avoiding any taper talk (compared to other central banks), they also amended their forward guidance to account for higher inflation tolerance. From July forward, the ECB expects to keep interest rates at their present or lower levels until inflation reaches 2% well ahead of their projection horizon and remain durably at or above that rate for the rest of the projection period. Although ECB President Lagarde said there were expectations for strong growth in the eurozone economy in the third quarter, the outlook for inflation is subdued and the Delta coronavirus variant is a “growing source of uncertainty.” The Euro opened today at the lower end of its weekly range, having yet to break $1.1750. German & Eurozone manufacturing and market services PMI’s are due at 8.30am & 9.00am.