GBP

Sterling fell around half a cent against the dollar yesterday, hurt as market risk sentiment turned sour creating a demand for the dollar. Against the euro it continued to trade in a tight range. Political jitters also undermined the pound when former senior advisor to Boris Johnson, Dominic Cummings, claimed in his blog that the Prime Minster lied to Parliament about not knowing that the alleged “party” was a “party” at Downing Street in May 2020. This has been denied by Deputy PM Dominic Raab, who told Times Radio this morning that the Prime Minister made it clear to the commons last week that he believed it was a “work event”. Data released this morning from the National Office of Statistics showed that UK employers added a record 184,000 staff to their payrolls in December, showing little sign of the effect of the Omicron variant. Today’s figure took staff numbers to 1.4% above their level in February 2020, before the pandemic.

EUR

After losing ground yesterday, the euro is trading in a relatively tight range against the dollar in early trading. The single currency’s losses on Monday came amid a broad rebound in the greenback’s fortunes, as a renewed risk- off wave triggered a fresh rally in US treasury yields. Federal Reserve Bank hike expectations and fears of a Russia-Ukraine conflict were cited by traders as reasons for the yield rises. Later this morning, the eagerly watched ZEW Economic Sentiment Survey for the Eurozone and Germany is due for release. The sentiment indicator in Germany is forecast to rise but expected to decline modestly for the bloc. Unless this data reveals a convincing improvement in confidence, the shared currency is unlikely to capitalise on them.

USD

The dollar managed to post a modest gain in early trading as it looks to preserve yesterday’s bullish momentum. The benchmark 10-year treasury bond yield is currently trading at its highest level in two years with fears of an escalation in the Russia-Ukraine conflict and covid worries in China creating a demand for the safe-haven. Yesterday a delegation of senators from President Biden’s administration visited Kiev, where they met with the Ukraine President and other top officials. Meanwhile, the number of Covid-19 cases in China reached its highest level since March 2020, as Beijing races to smother outbreaks just three weeks before hosting the Winter Olympics.

Economic Calendar

11.00 EUR Eurozone ZEW economic sentiment
11.00 EUR Germany ZEW economic sentiment