GBP

Sterling has started the week on a positive note after hopes of a breakthrough in Brexit talks on Northern Ireland were raised on Friday as the European Union suggested deals could be struck in key areas as early as next week. Following talks on Friday, European Vice-president Maros Sefcovic told a press conference that he acknowledged and welcomed the change in tone of talks with UK chief negotiator Lord Frost and hoped they would lead to tangible results for the people of Northern Ireland. Both sides agreed to intensify talks in Brussels this week. According to a survey by the Chartered Institute of Personnel and Development, private-sector employers expect to raise staff pay by an average of 3.5% next year, well below the Bank of England’s inflation rate forecast for 2022.

EUR

After losing more than 1% against the dollar last week, the euro remains under pressure and is struggling to find support in early trading. Members of the European Parliament’s committee on Economic and Monetary Affairs will this morning question European Central Bank president Christine Lagarde on Euro-zone inflation which breached 4% in October and about the future of ECB pandemic stimulus. Eurozone’s trade balance figures will be released later this morning.

USD

The dollar which registered impressive gains last week has eased back against its major peers in the European opening. The dollar index which measures the greenback against 6 of its major peers, eased 0.2% from Friday when it posted its biggest weekly gain since August and hit its highest level since July 2020. Traders cited a “risk on“ market environment and an easing of rate hike expectations as the reasons for a lack of dollar demand. In an interview with CBS news over the weekend, Minneapolis Fed President Nell Kashkari argued that the central bank should not overreact to temporary factors driving inflation and he saw price pressures easing in the second half of 2022. On a similar note, US treasury secretary Janet Yellen noted that the pandemic was the cause of inflation and getting Covid -19 under control would reduce price pressures.

Economic Calendar

10.00 am EUR ECB’s Christine Lagarde Speech
10.00 am EUR trade Balance