GBP

Sterling has stabilised against its major currency peers in the early trading session. After a torrid few days, the pound has recovered 0.3% since hitting yesterday’s 10 month low against the dollar and 0.2% since yesterday’s 2 month low against the euro, but remains vulnerable to negative Brexit and energy headlines. UK business secretary Kwasi Kwarteng has suggested that the fuel crisis is “stabilising”, while the Times newspaper reported that there are still supply problems in the south of the country. Meanwhile the British chamber of commerce has warned of the harm that the fuel and energy price crisis could do to the economy in the final quarter. Financial markets are now pricing 3 rate hikes in 2022. They expect the Bank of England to lift rates by 65 basis points to 0.75% by year end with the first increase predicted to come in February.

EUR

EUR/USD finished yesterday with sharp losses, falling for a fifth consecutive day. German economic data disappointed, with both inflation and employment coming in below expectations, while differentials between bond yields also created greenback demand. Since early August, Yields on 10-year United States Treasury Inflation Protected Securities, which strip out inflation, have risen by about 37 basis points compared with a gain of only 5 basis points for its German counterpart. Inflation data due for release his morning could dictate the next moves for the shared currency.

USD

Treasury Secretary Janet Yellen on Thursday agreed that any default on U.S debt would cause irreparable harm as well as ensuing financial crisis and recession as President Joe Biden signed an emergency funding bill that should keep government agencies running until early December. Senate Republicans are attempting to block any rises in debt ceiling which could lead to the U.S defaulting on its debts. Any default on debt seems unthinkable, but markets remain nervous while republicans object to raising the limit and could add to the dollars “safe haven” flows.

Economic Calendar

10.00 am EUR Consumer price Index
01.30 pm US personal income
03.00 pm Michigan Consumer sentiment
03.00 pm US ISM Manufacturing PMI