GBP

The pound lost some ground against the dollar yesterday, after the greenback benefitted from a “risk -off“ market environment. In early trading, Sterling is little changed from yesterday’s close. Although there were few fresh headlines surrounding Brexit, it was reported that Ireland is making “contingency plans” in the event of the UK government trigging Article 16 of the Northern Ireland protocol. Article 16 of the protocol sets out the process for taking unilateral “safeguard” measures if either the EU or UK concludes that the deal is leading to serious practical problems or causing diversion. The EU has warned of “serious consequences“ and ultimately it could lead to a trade war should the UK trigger Article 16.

EUR

After trading just above the major chart point of 1.1600 for the third time in the past two weeks, the Euro once again failed to find any traction against the dollar and finds itself under pressure in early trading. The single currency suffered from “safe haven“ demand for the dollar and remarks from European Central Bank policymaker Klass Knot, who said yesterday that conditions for a rate hike were very unlikely to be met in 2022. This morning, German Central Bank and ECB policymaker Chief Jens Weidman will be speaking. Weidmann, who is resigning from his position at the end of year has recently voiced his concerns about the ECB’s loose monetary policy and there has been speculation that his resignation was due to disagreements with his ECB colleagues.

USD

Fears of contagion in the Chinese property crisis has fuelled demand for the safe haven dollar. Yesterday, the Federal Reserve Bank sent its first direct warning about the potential global damage a property crash in China could cause. Later today, markets will focus on US inflation data which may give clues to when the Federal Reserve Bank might raise interest rates. Economists expect a 0.4% rise in the Consumer Price Index for October, up from 0.2% in the previous month, with the closely watched year-on-year core measure gaining 0.3% to 4.3%, well above the central bank’s annual 2% target. Yesterday, San Francisco Fed President Mary Daly and Minneapolis Fed President Neel Kashkari both made comments that suggest it was not clear that high inflation will become more entrenched than expected next year.

Economic Calendar

13.30 pm US initial jobs claims
13.30 pm Consumer Price Index