GBP

Sterling got a slight boost from data released this morning which showed that retail sales rose by 0.8% in October, surpassing the market expectation for an increase of 0.5%. Brexit Minister Lord Frost and European Vice president will continue talks in Brussels today to try and solve post-Brexit difficulties over the Northern Ireland border. Ahead of the talks Lord Frost, who over the past two days has been meeting northern Ireland’s pollical parties, said it would “be better” to find an agreement with the EU than take unilateral action. Irish Prime Minister Michael Martin speaking on BBC this morning said the “mood music” surrounding EU-UK negotiations had improved in recent weeks and there was “serious intent “ within the EU to reach an agreement.

EUR

Speaking in Frankfurt this morning, European Central Bank President Christine Lagarde said Inflation will fade so the European Central Bank should not tighten monetary policy as it could choke off the economic recovery. She continued to push back expectations of a rate hike in 2022, saying the conditions to raise rates are very unlikely to be satisfied next year. Her thoughts echo those by the central bank’s chief economist Philip Lane who yesterday said that supply bottlenecks are not expected to get worse and from here and will ease, adding that he does not see inflation moving above the ECB’s target. The common currency will find it hard to attract support if policymakers continue their current tone on inflation.

USD

Federal Reserve policymakers continue to talk about the possibility of an earlier interest rate hike than they thought would be needed just a few months ago. Yesterday, Chicago Fed President Charles Evans said he was more “open minded” to raising rates next year than he was 6 months ago. Separately, Atlanta Fed president Raphael Bostic said he believes they could start raising rates in the middle of next year. Earlier this week, New York President John Williams called for the Federal Reserve Bank to be more “hawkish” at the next meetings. In September only half of the Fed’s policymakers thought they would need to begin to raise rates next year, with the other half seeing 2023 as more likely for the first rate rise.

Economic Calendar

15.45 US Fed’s Waller speech
17.15 US Fed’s Clarida Speech