GBP

Sterling has opened in similar ranges to last week against the USD and the EUR. This is amid continued Brexit pressures and ongoing hints of a November interest rate hike. On Tuesday, the UK will continue talks with the EU on post-Brexit trading rules for Northern Ireland. The market will watch this closely, with the role of the European Court of Justice upholding these rules remaining a sticking point. Meanwhile, GBP stays buoyant amidst continued expectation that the Bank of England will probably be the first major central bank to raise interest rates in the post-pandemic cycle. Markets have already begun to price in an interest rate rise with traders focusing on the Bank of England’s Tenreyro’s speech this afternoon, to gauge any further appetite for a hike.

USD

The dollar has edged lower on Monday, following comments from the Fed Chair Jerome Powell on Friday. Powell said the US central bank should start the process of reducing its support of the economy by cutting back on its asset purchases, but should not yet touch interest rates. Investors took this as a signal that other major central banks may hike rates before the Fed. This has seen the US Dollar Index slip back to monthly lows around 93.50, continuing Friday’s losses. Elsewhere, struggling developer China Evergrande Group surprised the market by making good on a last-minute bond coupon payment, averting a costly default. The news has been well received by the equity markets but allows for a risk friendlier mood which weighs on safe-haven currencies like the USD.

EUR

The euro has opened strongly against a broadly weak USD but has struggled to make much ground against GBP. In what is a flat week for euro data, the market is eyeing Thursday’s European Central Bank Interest Rate decision. On Friday, European market gauges of projected inflation hit their highest levels since 2014 owing to supply bottlenecks and spiking energy prices. Despite this, the European Central Bank are not expected to adjust policy when they meet on Thursday with Christine Lagarde so far downplaying inflationary prices, with her belief that the post-pandemic price increase is largely temporary.

Economic Calendar

12:30 pm US Chicago Fed National Activity Index (Sep)
13:00 pm UK BoE’s Tenreyro speech