GBP

Sterling has gained modestly against the dollar and is trading flat against the euro this morning after UK inflation hit a nine year high last month. The Office of National Statistics (ONS) report released early this morning showed consumer prices rose by 3.2% in August after a 2% rise in July, the highest rate since March 2012. The 1.2% rise in the space of a month, marked the sharpest such increase since detailed records begun in 1997. Economists had been expecting a 2.9% reading for August. The rise in inflation should start a debate amongst Bank of England policymakers on when to start tightening monetary policy and the timing of interest rate hikes.

EUR

Speaking on Bloomberg television this morning, ECB president Christine Lagarde said that due to unprecedented monetary and fiscal aid and more vaccinations, the economy is recovering faster than expected and the region is now expected to reach pre-pandemic output levels by the end of the year. Germany’s institute for economic research said to expect the country’s inflation to slow to between 2% and 2.5% in 2022 from an estimated 3% this year.

USD

The dollar weakened yesterday afternoon after inflation data came in below forecasts, tempering expectations that the Federal Reserve Bank will begin to decrease their pandemic stimulus scheme. However, concerns about high stock valuations, covid and other factors resulted in a fall on Wall St shares, creating a demand for the safe-haven greenback . It has also found favour this morning after Chinese economic data came in below forecasts.

Economic Calendar

10.00 am EUR labour cost
10.00 am EUR industrial production
1.30 pm EUR ECB’s Schnabel speech