After closing last week with its third straight week of gains against both the dollar and euro, the pound remains steady in early trading. However, Brexit concerns again surfaced at the weekend with Foreign Minister Liz Truss writing in the Telegraph on Sunday insisting she was willing to use “legitimate provision” should a “negotiated solution” not be reached on the Northern protocol. Responding Joao Vale de Almedia, the EU’s ambassador to the UK, said it was unhelpful to keep agitating the issue, noting the bloc was not surprised by the threat but were not too impressed. Truss will resume talks with EU Vice President Maros Sefocovic this week. On the positive side, in a survey by trade body Make UK and accountants PwC released today, British manufacturers said they are optimistic that business conditions and productivity will improve this year despite most saying they have been hurt by Brexit and rising costs. According to the survey, 73% of manufacturers believed conditions for the sector would improve and 78% foresaw at least a moderate increase in productivity in 2022.
The euro had its biggest daily gain in a month against the dollar on Friday. The single currency’s gains came after employment data from the US disappointed and the first readings of Eurozone Consumer Price Index for December came in higher than expectations at 5%, above the previous months 4.9 % and the 4.7% forecasted. Responding to the inflation data, an ECB board member said on Saturday that rising energy prices may force the central bank to stop “looking through” high inflation and act to temper price growth. November’s unemployment rate for the bloc is due later today.
The benchmark 10-year US treasury bond yield climbed to its highest level in nearly two years on Friday and helped the dollar stay reasonably resilient against its rivals despite disappointing employment figures. Friday’s data showed that Non-farm payroll (NFP) rose by only 199,000 in December, missing the market expectation of 400,000. However, wage inflation, as measured by the Average Hourly Earnings, came in at 0.6 % and 4.7% on a monthly and yearly basis respectively, surpassing economist’s forecasts and reinforcing market expectations that the Federal Reserve Bank will raise interest rates at their March meeting.
10.00 am Eurozone unemployment rate