GBP

Sterling has begun the week steady against both the euro and dollar. In a speech given to OMFIF (a central banking think tank) on Friday, Bank of England policymaker Catherine Mann said that the central bank needs to lean against inflation pressures and stop expectations of higher price growth from getting entrenched in businesses wage and pricing decisions this year. This was the first official speech given by a policymaker since the BOE raised interest rates last month. Ahead of a meeting today in Brussels with European Vice President Maros Sefcovic, UK foreign Secretary Liz Truss said there was a “deal to be done” on the Northern Ireland protocol that protects peace and works for all sides. Today’s talks commence after Stena Lines UK ports head Ian Davis reported at the weekend that Welsh Ports have seen a traffic drop by almost a third due to Brexit regulations imposed at the beginning of the year.

EUR

The euro has failed to build on modest gains made on Friday against the dollar in early trading. While speaking at the Davos World Economic Forum on Friday, European Central Bank President Christine Lagarde said that geopolitics and weather factors are driving energy prices higher, but that the ECB were not seeing wages being bid up, adding that demand in Europe is not excessive and as a result the Eurozone was unlikely to face the same inflation as the US. Fellow ECB member Francois Villeroy de Galhau reiterated this morning that the central bank stands ready to do what it takes to get inflation back down below 2%.

USD

The dollar firmed slightly on Monday, with the dollar index reserving some of the losses from Friday. As Wall Street’s main indexes suffered heavy losses and the 10-year US Treasury bond yield fell sharply, the greenback found it difficult to outperform its rivals. Ahead of this week’s much-awaited Federal Reserve Bank meeting on Wednesday, geopolitical tensions are likely to effect risk sentiment and the dollar’s performance. The US State department announced on Sunday it was ordering diplomat’s family members to leave Ukraine. The order, which also allowed US diplomats stationed at the embassy in the Ukrainian capital Kyiv to leave voluntarily, was one of the clearest signs yet that American officials are bracing for an aggressive Russian move in the region.

Economic Calendar

13.30 US Chicago Fed National activity index
14.15 US Manufacturing PMI
14.15 US Services PMI