GBP

For now, sterling is dismissing the intensive political scandal surrounding Prime Minister Johnson. On Monday, Johnson faced renewed calls to resign, after Senior Civil Servant Sue Gray’s report into lockdown gatherings at his offices and residence pointed to “serious failures of leadership”. The Metropolitan police also said they were investigating at least 12 gatherings at Downing Street. The pound showed little reaction to this news, however it did fall on market demand for the euro. It remains steady in early trading. A survey by mortgage lender Nationwide released this morning showed house prices rising by 0.8% in January, 11.2% higher than their level in January 2021.

EUR

The euro has added to gains made yesterday against the dollar in early trading and is now looking to build on its recent recovery from the lowest level it hit since June 2020, on Friday against the greenback. The euro found demand as inflation data from Germany showed that although slowing in January, inflation was still higher than expected by analysts and well above the European Central Bank’s price stability target of 2% for the Eurozone as a whole. Pollical stability in Italy, where President Mattarella was re-elected to a second seven-year term, ending days of political deadlock, also helped the euro.

USD

The corrective downside of the dollar which started yesterday appears to still be in place this morning. The greenback was hurt yesterday as although several Federal Reserve Bank policymakers said the central bank would raise interest rates in March, they spoke cautiously about what might follow, signalling a desire to keep options open in the face of an uncertain outlook for inflation and with the pandemic still ongoing. Despite financial markets now pricing in up to 6 rate hikes this year, speakers from four regional federal banks – in what may have been orchestrated speeches – resisted in laying out a clear policy path that markets have come to expect from recent monetary policy tightening cycles. The US treasury’s top economist Ben Harris, also commented on Monday that inflationary pressures should ease this year due to weaker demand for goods, easing supply bottlenecks.

Economic Calendar

14.45 US Markit Manufacturing PMI
15.00 US ISM Manufacturing PMI