After losing around half a cent against both the dollar and euro on Monday, the pound remains steady after unemployment data for August matched expectations. The Office for National Statistics (ONS) data showed the unemployment rate at 4.5 %, while average weekly earnings rose 6% in June-August period. The Bank of England will be closely monitoring pay growth as it prepares to raise interest rates for the first time since the pandemic struck. Markets are now predicting that the rise could come as early as December and this has triggered a selloff in UK bonds, in turn driving government borrowing costs to levels not seen in over two years. The UK’s Brexit minister David Frost will set out government demands for changes to the Northern Ireland Protocol later today. Frost will deliver a speech in Lisbon ahead of the EU publishing its proposals tomorrow.


The euro remains in a tight range against the dollar, not far from the two year lows it hit recently. Yesterday, European Central Bank chief economist Phillip Lane downplayed the prospect of euro interest rates rising as a result of the current spike in inflation saying the central bank “will not react to inflation shocks that are expected to fade away”. Traders await the German wholesale price index and the Eurozone ZEW economic sentiment index released later today.


The dollar has benefitted in early trading as “risk aversion“ became prominent when equities fell in the far east. Chinese property developer Evergrande missed its third round of bond coupon payments in three weeks today, intensifying market fears over contagion involving other property developers. News of this drove the Nikki and Shanghai index’s down over 1% and creating a flight into the greenback. The dollar index traded as high as 94.33, not far from its one-year high hit at the end of September.

Economic Calendar

10.00 am EUR ZEW survey
10.00 am EUR German wholesale price index
01.00 pm ECB’s Elderson speech