GBP

The pound has started the day under pressure, after falling over 1% against both the dollar and euro on Tuesday. Despite Bank of England Governor Andrew Bailey’s repeated comments about raising rates before halting Central Bank’s bond buying scheme, sterling found little comfort as the market feared what the sharp rise in gas and fuel prices would do to the UK’s economic recovery. By the close of trading, the pound had fallen to its lowest levels against the dollar since January and a two month low against the single currency. Governor Bailey will speak later today at the ECB’s forum on central banking.

EUR

The euro fell to a one month low against the dollar but gained against sterling yesterday. It remains on the weaker side against the greenback and steady against sterling in early trading. At the European Central Bank forum yesterday Christine Lagarde and Bank of France head Francois Villeroy de Galhau tried to placate inflation fears and defend the bank’s easy monetary policies. Lagarde promised not to “overreact to transitory supply shocks” driving inflation higher and added that the central bank would continue to provide conditions necessary to fuel the pandemic recovery. Several policymakers are due to give speeches at the forum which continues today.

USD

The dollar index rose to its highest levels this year yesterday, tracing the rise in US treasury yields. The US benchmark treasury yields rose to 1.54% feeding on Federal Reserve Bank interest rate hike expectations. Testifying before congress yesterday Fed chairman Jerome Powell repeated his stance that inflation has risen more than anticipated and that his employment threshold to taper has been “all but met”. Powell will also be speaking at the ECB forum today. The dollar also benefitted from “safe -haven “ flows in the wake of Chinese Property developer default fears.

Economic Calendar

09.30 am GBP UK consumer credit
10.00 am EUR Consumer confidence
04.30 pm EUR ECB Lane speech
05.45 pm EUR ECB Lagarde speech
05.45 pm US FED Powell speech