GBP

After falling to a 3-week low against the dollar yesterday, sterling has been steady overnight against its peers. Prime minister Johnson downplayed the significance of the rift between the UK and France over post Brexit fishing rights calling the issue “vanishingly unimportant“ compared with efforts to limit global warming. Added to this, French transport minister Jean-Baptiste Djebbari was speaking on Europe Radio 1 this morning and said the UK has shown a “constructive spirit” in recent talks. The purchasing managers index for the services industry is released later today, but the major focus will be on the Federal Reserve Bank policy meeting this evening.

EUR

The Euro’s recovery against the dollar was short lived, as the single currency gave away most of Tuesday’s early gains by the close of the day as the greenback found support ahead of today’s US central bank meeting. European Central Bank President Christine Lagarde is not expected to make any policy statements when she gives a speech today commemorating the anniversary of the Bank of Portugal.

USD

The dollar held within striking distance of the year’s peaks against the euro and yen on Wednesday, as traders looked for the Federal Reserve to begin unwinding pandemic-era policy support faster than central banks in Europe and Japan, by tapering its $120bln per month asset purchase programme. However, markets will focus more on if the Fed changes part of its policy statement, and particularly its description of inflation as “largely reflecting transitory factors”. In short, believing it could be temporary due to supply bottlenecks. In recent weeks, bank officials have acknowledged that inflation this year has already lasted longer than anticipated and some analysts now believe the US could raise next year having previously thought the first hike would come in 2023. Any comments on inflation concerns should support the dollar. Ahead of tonight’s meeting, employment data is released this afternoon in the form of the ADP private payroll report for October.

Economic Calendar

10.15 am ECB’s President Lagarde speech
12.15 am US ADP employment report
18.00 pm US Federal Reserve Bank rate decision
18.00 pm Federal Reserve monetary policy statement