GBP

After benefitting from improved “risk“ market sentiment yesterday, sterling has started the morning session on the backfoot as traders pare their expectations of a Bank of England rate rise at this month’s meeting. Since the Omicron variant emerged last week, financial markets now see a 60% chance of a hike at the December 16 meeting down from 80% before. Speaking yesterday, the Bank of England Governor acknowledged that the economic impact of Covid-19 remains strong, when asked to assess the news of the new variant. Brexit news was also a concern for investors as European Commission Vice-president Maros Sefcovic urged Britain yesterday, to reciprocate immediately to concessions made over post -Brexit trade rules for Northern Ireland in recent months, adding that Brussels would be firm in defending its interests.

EUR

The euro has started the day little changed from yesterday’s close against the dollar. According to a report by Reuters yesterday, a growing number of European Central Bank heads are considering delaying part of a decision on the ECB’s stimulus plans after the emergence of the new variant at this month’s meeting. The central bank’s governing council will meet on 16/12 to decide whether to end its emergency bond purchases in March and three sources on or close to the ECB’s governing council said some policymakers would favour leaving the decision on bond purchases to their following meeting in February, when more is known about the impact of the Omicron virus and the outlook for inflation. Eurozone unemployment data is due later today.

USD

The dollar remains steady in early trading against its major peers. The greenback found demand again yesterday afternoon when Federal Reserve Bank head Jerome Powell, testifying before congress for the second day, reiterated that it was appropriate to consider faster tapering of their pandemic bond buying scheme at the December meeting which could open the door to earlier interest rate hikes. Powell was joined in his “hawkish“ comments by fellow policymakers. Cleveland Fed President Loretta Mester said in an interview with Bloomberg that a quicker taper would give the Fed room the hike earlier if needed, while the New York President voiced his concerns that the omicron variant could cause inflation pressures to last.

Economic Calendar.

10.00 EUR unemployment rate
13.30 US initial jobless claims
14.00 EUR ECB’s Panetta speech