Sterling fell aggressively against the dollar after London’s close, losing more than a cent after the market reacted to Brexit woes and US inflation data. Following EU vice president Maros Sefcovic’s briefing of diplomats on the Northern Ireland protocol negotiations, sources said that the European governments agreed on the need for “robust action” if the UK follows on from its threat to trigger Article 16 of the protocol. The fear of a post Brexit trade dispute, coupled with rise in US consumer prices sent the pound down to its lowest levels since December 2020 where it remains in early trading. Against the Euro, Sterling’s losses were not as acute as the single currency gained around 0.3%. Expressing his take on UK GDP figures released this morning, Chancellor Rishi Sunak said “there are challenges ahead for the British economy and the data shows we are on the right path”. The data revealed the economy grew by 0.6% in September, above forecasts, but estimates for the previous months were revised lower.
After being pressurised on numerous occasions in recent weeks, the Euro’s 1.1500 support level against the dollar finally broke and the single currency is now trading at its lowest levels against the greenback since July 2020. The dollar’s advance came after a rise in the consumer price index revived speculation that the US Federal Reserve Bank will have to tighten monetary policy earlier than markets had previously thought.
The dollar surged against its major peers yesterday evening. After finding demand when inflation data showed US prices rising at the highest rate in over thirty years, support was sustained for the greenback when US bond yields rose sharply. US President Joe Biden said yesterday that “reversing inflation was a top priority” for him. His remarks came after data showed that US consumer prices had risen to 6.2% in the 12 months through October, the largest year on year jump since November 1990. The data will add to recent calls for the Federal Reverse Bank to hike interest rates earlier than expected next year. No economic data for the US today as Veterans Day is observed.
12.15 EUR ECB Lane speech
16.00 EUR ECB Schnabel speech