Sterling is steady in early trading, down slightly against the euro but largely unchanged against the dollar from yesterdays close. According to a report in the Telegraph the government is drawing up plans for a work from home order as 440 omicron cases, the highest in Europe, were confirmed in the UK. The report said that Officials working on Covid policy have carried out modelling on the economic impact of people working from home over Christmas until mid -January. The government is also said to be also considering enforcing vaccine passports for entering crowded events. A survey by the French chamber of Great Britain showed delays to cross-channel trade is lengthening, with 42% of businesses reporting it taking an additional 2 to 3 weeks to import goods, compared to 28% in the April-June period.


The euro has gained some ground against its major peers in early trading, supported by comments from European Central Bank policymaker’s comments, which have contradicted President Lagarde dovish comments. Governing council member Mdais Muller said on Tuesday that in light of high inflation and the uncertain outlook, it is not obvious that the central bank should be adding to asset purchasing programme volumes beyond March. Muller added that inflation will take longer than expected to come down and risks remain tilted to the upside, echoing a point made recently by fellow member Robert Holzmann. In line with Muller’s comments, Slovak central Bank governor said that the ECB should not make any long-term commitments to asset purchases.


A rebound in market risk appetite has lessened demand for the dollar in early trading as investors took comfort from early signs that the new covid-19 variant would not derail global recovery. Early data from South Africa showed that although more transmissible, the Omicron virus does not appear to be as severe as previous variants. U.S. bank executives on Tuesday raised concerns about the impact of a sustained period of higher inflation, adding to pressure on the Federal Reserve to accelerate plans to slow down the pace of its asset purchases. Speaking at the Goldman Sachs Financial Services Conference, Wells Fargo Chief Executive Charlie Scharf said that the Fed may need to move more quickly to address inflation concerns, while Goldman Sachs Chief Executive David Solomon said he anticipated a period of higher inflation.

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