GBP

Sterling has continued to trade in positive territory this morning, helped by economic data which showed that the UK economy grew by 0.9% on a monthly basis in November compared to the market expectation of 0.4%. The data compiled by the Office of National Statistics showed that the British economy had finally risen just above what it had been before the country went into its first Covid lockdown in 2020. However, on a negative note, industrial production expanded by only 0.1% in the same period, slightly below forecasts. Commenting on the growth this morning, Finance minister Rishi Sunak said “It’s amazing to see the size of the economy back to pre-pandemic levels in November – a testament to the grit and determination of the British people”. As the pound heads for its fourth consecutive weekly gains of more than 0.5% against the dollar, further momentum could be decided by US retail sales released later today.

EUR

The euro has held onto its recent gains against the dollar, as selling pressure surrounding the greenback fuelled support for the single currency. The euro’s bullish momentum was preserved yesterday when the US producer price index fell slightly to 9.7% in December from 9.8% in November, causing US Treasury Bond yields and in turn the dollar to push lower. European Central Bank president Christine Lagarde speaks later today, and traders will look to see if she changes her stance on inflation in Eurozone. Lagarde’s speech comes after recent comments by new German central Bank head Joachim Nagel who urged policymakers to “be on the alert” in the wake of persistent inflation and ECB vice president Luis de Guindos who yesterday said that “perhaps inflation won’t be as transitory as forecast only some months ago.

USD

The dollar is headed for its largest weekly fall in more than a year on Friday as traders trimmed their “long” positions and deemed, for now, that several US rate hikes this year are fully priced in. In a week where data showed inflation at its highest levels since the early 1980’s, selling has forced the greenback through key support levels against the euro and Yen in particular and the dollar index is down over 1.2% on the week, on course for its largest percentage fall since December 2020. Federal Vice Chair nominee Lael Brainard, speaking before the Senate Banking Committee on Thursday said the Fed would be in a position to start lifting interest rates as soon as its bond purchasing programme ended in March. Retail sales for December and the Michigan Consumer Sentiment Index are released later today.

Economic Calendar

13.15 EUR ECB Lagarde Speech
13.30 US Retail sales for December
15.00 US Michigan Consumer Sentiment Index