GBP

The pound has held on to yesterday’s gains in early trading. Sterling gained around half a cent against both the dollar and euro after the release of yesterday’s CPI index which showed the inflation rate rising at its highest level in almost 10 years, increasing the likelihood that the Bank of England will raise interest rates at its December meeting. However, Policymaker Catharine Mann who joined the Monetary policy committee in September played down the prospects of the central bank undertaking a rate hike cycle. Speaking at an online event, she cautioned that rising rates of pay for newly hired staff were not feeding through into across-the-board rises for existing staff. She added that rising costs for essentials such as energy and food were likely to reduce the ability of other businesses to charge consumers more for goods and services next year.

EUR

The euro has gained momentum against the dollar in early trading. After hitting a 16-month low yesterday morning, the single currency gradually made gains to close 0.3% up on the day. However, further demand for the single currency may be limited ahead of speeches by European Central Bank policymakers Fabio Panetta and Philip Lane today. Yesterday board member Isabel Schnabel hinted at a possible division among policymakers when she said the central bank must be ready to rein in inflation if it proves more durable than forecast.

USD

The dollar’s recent momentum stalled on Wednesday following a sharp fall in bond yields. The benchmark 10-year US treasury bond yield which gained more than 10% since the release of the US inflation data last week, fell nearly 3% yesterday and lessened any demand for the greenback. A speech by Federal Reserve Bank of New York president John Williams will be the focus for traders this afternoon together with the release of the weekly jobless claims.

Economic Calendar

11.00 EUR ECB Panetta speech
13.30 US Initial Jobless claims
14.30 US Fed’s Williams speech
14.30 EUR ECB Lane speech