GBP

Despite reports in the Times that Prime Minister Boris Johnson does not want to trigger article 16, sterling has begun the morning session just above the 11-month lows hit yesterday against the dollar. The Times reported that the UK wants to de-escalate tensions with the European Union and renew efforts to find a solution over the Northern Ireland trade dispute which has threatened broader relations between the two sides. Britain’s Brexit negotiator Lord Frost will meet European union vice-president Maros Sefcovic in London today for further talks. Against the euro which has also been hit by broader dollar strength, the pound remains steady.

EUR

The Euro remains under pressure against the dollar hitting a fresh 16 month low in far east trading. Yesterday, the European Central Bank acknowledged in its latest economic bulletin that inflation is lasting longer than initially anticipated but reiterated most of the price pressures are judged to be of a temporary nature. The central bank raised its GDP growth forecasts to 5% from 4.3% in 2021 and said it sees annual inflation at 2.4% this year. The publications showed little signs that the ECB was changing its interest rate outlook and the shared currency found no demand after its release.

USD

The dollar is heading for its best week in almost five months against its major peers as markets bring forward expectations that the Federal Reserve Bank will raise interest rates. Futures markets have now priced in a 70% chance that the central bank will hike by June next year followed by another in November. The greenback’s rally was fuelled by data released on Wednesday which showed consumer prices last month rising at their fastest annual pace since 1990, calling into question the Fed’s belief that price pressures were “transitory“. Traders will now turn their attention to the inflation readings from the University of Michigan survey released later today and an online conference where New York Fed president John Williams will be speaking, potentially giving insight to policymakers views of the recent economic data.

Economic Calendar

10.00 EUR industrial production
13.50 EUR ECB’s Lanes speech
14.00 GBP BOE’s Haskel speech
15.00 US Michigan consumer sentiment survey
17.10 US Fed’s Williams speech