GBP

The pound steadied in early trading after falling to its lowest level in in 11 months against the dollar yesterday. Against the euro, it was largely unchanged. The expected tightening of monetary policy by the US Federal Reserve Bank and Brexit concerns have weakened sterling throughout the week. Yesterday, the newly formed German government issued a warning to the UK to expect “countermeasures” if the Northern Ireland Brexit deal is broken. The warning came after Prime Minister Johnson restated his readiness to invoke Article 16 of the protocol in talks with his Irish counterpart Michael Martin. Later today, Bank of England Governor Andrew Bailey is due to speak at Cambridge University. After recent jobs and inflation data beat expectations, markets will listen for Bailey’s stance on an interest rate hike at next month’s meeting.

EUR

After trading at its weakest level since June 2020 against the dollar yesterday, the euro has gained modestly in early trading. Later today, the European Central Bank will release its monetary policy meeting minutes from their last meeting. The minutes are expected to show no willingness by the majority of policymakers to raise interest rates next year. In the latest comments by council members, Slovenia central bank head Bostjan Vasle shrugged off persistent inflation fears. Several ECB policymakers, including President Christine Lagarde will deliver speeches later today.

USD

The release of the minutes from the Federal Reserve Bank yesterday evening showed that worries about inflation dominated this month’s meeting and that several policymakers would be open to speeding up the taper of their bond-buying program if inflation stayed high, and to move quicker than markets had previously anticipated to raise interest rates. Reinforcing this yesterday, Federal Reserve Bank of San Francisco President Mary Daly said she sees the case for speeding up the taper and expects a rate hike at the end of 2022. Notably, just last week Daly said “I have a strong bias to stick to current taper pace”. Daly’s comments came after the Personal Consumption Expenditure (PCE) index showed that prices had climbed 5% in the 12 months through to October. The PCE index is the central bank’s preferred measure of inflation. No data due today as the US celebrates Thanksgiving Day.

Economic Calendar

09.00 ECB Elderson speech
09.30 ECB Schnabel Speech
12.30 ECB minutes
13.30 ECB Lagarde speech
17.15 BOE Bailey speech