Sterling held above key fundamental levels on Monday as Brexit negotiations and policy tightening continued to dominate the headlines. Speaking yesterday, Bank of England policymaker Silvana Tenreyro said that some inflation drivers are expected to remain short-lived, such as energy prices and supply chain disruption, and added that her “policy votes will aim to strike a balance between these different effects and risks.” As one of the more ‘dovish’ voters on the committee, GBP traded sideways on this news as the market continues to price a rate hike at a 60% chance. Elsewhere, David Frost, the British minister responsible for implementing the Brexit deal, said that the EU’s proposal on the Northern Ireland protocol was not going “far enough” to free up trade in the region. This too, did little to move sterling, as Brexit talks continue today. Looking ahead, traders await news on Wednesday’s autumn budget and spending review.


The dollar has opened 0.4% higher against the euro on Tuesday as it managed claw back some of its losses seen last week and in early trading yesterday. The US dollar index held at 93.856 – in between a one-year high of 94.563 hit earlier in the month and a one-month low of 93.483 made on Monday. Analysts expect it might stay there through a flurry of central bank meetings in the coming days. The greenback outperformed its European rivals on the back of rising Treasury bond yields which gained more than 1% during the day on Monday before closing flat around 1.65%. The market now looks to today’s release of New Home Sales and CB Consumer Confidence Index data. A strong reading is bullish for the dollar as demand for goods and services in the housing market is stimulated.


The euro fell 0.3% overnight against its main peers on softer-than-forecast German business morale and expectations that the European Central Bank (ECB) will stay dovish when it meets on Thursday. The headline Business Climate Index of the IFO Survey for Germany declined to 97.7 in October from 98.9 in September. This reading fell short of the market expectation of 97.9. To add to the single currencies woes, the Bundesbank said that the full-year growth in 2021 was likely to be significantly lower than the June forecast of 3.7% due to persistent supply chain issues and the loss of momentum in the service sector’s business activity. A speech today from the Bank of France’s Governor Villeroy de Galhau will be carefully watched for any clues on the ECB’s stance on tightening policy.

Economic Calendar

14:00 pm US New Home Sales (MoM)(Sep)
14:00 pm US Consumer Confidence (Oct)