GBP

Sterling remains steady in early trading against both the dollar and euro. After a torrid day on Thursday, the pound found a little momentum on Friday when data showed that the UK construction sector grew at its fastest pace in six months in January as worries about the latest wave of covid cases subsided. After hitting a 3-month low in December, the Construction Purchasing Managers Index (PMI) rose to 56.3 in January, the highest reading since last July. This morning’s house price report by mortgage lender Halifax showed that house prices in January rose at their slowest pace since June last year as a post-lockdown boom in the housing market started to fade. House prices rose by 0.3% in January, down from 1.1% in December and Russell Galley, managing director said “it remains likely that the rate of price growth will slow considerably over the next year, even as the limited supply of houses for sale will provide some support to prices”.

EUR

The euro has started the week on the backfoot against the dollar, after rallying to a three-week high on Friday. The single currency lost support this morning after comments from ECB policymaker Martins Kazaks, who said the ECB could end its stimulus programme earlier than planned but it is unlikely to raise interest rates in July, as traders expected. Kazaks, who is Latvia’s central bank governor, pushed back market forecasts of a July move because it would imply a complete tapering of the ECB’s bond purchases before that date. The ECB has long said it would end its bond purchases “shortly before” raising its deposit rate from minus 0.5% and ECB head Christine Lagarde reaffirmed that commitment last Thursday. German industrial production dipped in December, official data showed on Monday, as supply bottlenecks and a drop in construction hampered Europe’s largest economy.

USD

The dollar is staying resilient against its rivals at the start of the week, following Friday’s rebound, which was fuelled by the upbeat January jobs report. The US Bureau of Labor statistics reported that the Non-farm Payrolls rose by 467,000 in January, surpassing the market expectation of 150,000 by a wide margin. Additionally, the report revealed that the annual wage inflation, as measured by the Average hourly earnings, jumped to 5.7% from 5% in December. Supported by these figures, the US dollar index gained for the first time last week and US treasury yields rose as markets began to price in a 30% chance that the Federal Reserve Bank will raise rates by 50 bps at their March meeting. There are no high tier data releases from the US today.

Economic Calendar

No major economic data releases today