Sterling remains under pressure in early trading after falling 0.4% against the dollar and 0.3% against the euro yesterday . The pound’s decline came despite comments from Bank of England policymaker Michael Saunders that the Central Bank may need to raise interest rates next year if growth continues and inflation shows signs of becoming more persistent . Saunders who last month voted for an early stop to the BOE’s £895 Bln bond buying stimulus plan , repeated his view that continued bond purchases risked increasing medium -term inflation expectations . Although expected , Sterling was pressured when PM Johnson announced plans to introduce a 1.25% national insurance tax hike .
European Central Bank policymaker Robert Hotzmann has commented that “ there is a possibility that the ECB may be able to normalize monetary policy sooner than financial markets expect . His comments came in contrast to fellow policy maker Bostjan Vasle who said the ECB still need “highly accommodative monetary policy stance as new waves of the pandemic may slow economic recovery . These mixed signals come ahead of
tomorrow’s ECB meeting , the key event of the week .
The dollar was back in demand yesterday in the wake of a positive move in US treasury bonds . The benchmark 10 year treasury note rose as high as 1.385% for the first time since mid-July, a climb of almost 6 basis points since last week’s close . Buoyed by higher treasury yields , the dollar index rose to a one week high against its major peers . In the absence of any major market-moving economic data , traders will look towards a speech by New York Fed President John Williams. for any hints on whether “substantial further progress” in the labour market is needed to consider tapering their bond buying scheme .