GBP

After reaching its highest levels in 18 months against the euro once again yesterday afternoon, sterling has lost some ground against the single currency in early trading but remains steady against the dollar. Data released this morning showed UK public borrowing falling by around half in the first six months of the current financial year compared with a year earlier. Chancellor Rishi Sunak will present fresh budget forecasts next week which are expected to show borrowing this financial year on track to come in around 40 billion pounds below the most recent forecasts made in March thanks to faster economic growth. Markets expect that the Bank of England will be the first major central bank to raise interest rates in the post-pandemic era, but economists polled by Reuters think the first hike will not come until early next year, later than is currently being priced in. The poll taken after Governor Bailey’s comments at the weekend that the bank was ready to “act now”, showed most analysts expecting a 0.15 base point rise to come in either February or March and around a fifth expected it next month, in line with recent expectations.

EUR

The euro remains in its recent range against the dollar with no major economic releases due today. Bundesbank head and European Bank policymaker Jens Weidmann announced yesterday that he will be stepping down from both positions at the end of the year. Weidmann has been one of the biggest names within the decision-making body of the ECB and was known for his more conservative views on policy and there has been speculation that his departure may be linked to the current monetary policy stance of the ECB. The European council will today tackle Poland over its recent court ruling that questioned the primacy of European laws.

USD

The dollar index was little changed this morning, trading just above the 3-week low hit on Tuesday. The Federal Reserve’s beige book, a period evaluation of the economy in the central Bank’s 12 districts showed the economy growing at a solid pace, but labour shortages and supply chain bottlenecks were restraining growth and triggering higher inflation. The weekly jobless claims and the Philadelphia Fed Manufacturing Index are due for release later today.

Economic Calendar

01.30 pm US initial jobless claims
01.30 pm Philadelphia manufacturing index