GBP

Broad based dollar strength has kept the pound under pressure in early trading, but against the euro it has remained steady, holding on to most of yesterday’s gains. The French government has threatened to use energy supplies as a way to “put pressure” on Britain to comply with the Brexit agreement. The country’s Europe minister Clement Beaune speaking on French radio said he was exasperated by restrictions on French fishing fleets and said he would talk to his European counterparts in the coming days to discuss what measures they will take at European or national level to apply pressure on the UK. The minister did not elaborate on exactly what action could be taken, but did mention that Britain relies on French energy supplies.

EUR

Euro/dollar has resumed its recent decline this morning with traders citing fears of industry shutdowns weighing on the common currency. France’s finance minister Bruno Le Maire has said the government may have to intervene if energy prices continue to soar, adding it was now the time to have a coordinated EU response to tackle the issue. The euro has also suffered because the ECB, unlike other major central banks, shows no sign of tightening monetary policy any time soon. Bank of France head Francois Villeroy de Galhau reiterated that message yesterday saying that they need to keep cool heads about inflation, adding that this year’s rises were temporary.

USD

The dollar edged higher in early trading backed by rising bond yields. 10-year US government bond yields shot to the highest level in over three months this morning amid worries that the continued surge in crude oil/energy prices will stoke inflation and may force the federal reserve bank to raise rates earlier than expected. The “safe haven“ greenback is also finding support as the US debt limit deadline approaches on 18th October. Speaking on CNBC yesterday, US Treasury Secretary Janet Yellen said that a failure to raise the debt limit could hurt the reserve status of the dollar and cause a recession. The US ADP employment report for September is released later today.

Economic Calendar

10.00 am EUR retail sales
01.15 pm US ADP employment report