Sterling continues to trade in a tight range against both the dollar and euro. Markets showed little reaction to Prime Minister Johnson’s cabinet reshuffle yesterday where old ally Jacob Rees-Mogg has been appointed the new “Brexit opportunities minster”. Brexit woes were portrayed in the latest report from the Public accounts committee, which said the “only detectable impact of Britain’s exit from the European Union so far has been to increase the burden on businesses as new border arrangements have added to costs”. Market focus later today will be on a speech given by the Bank of England’s chief economist Huw Pill before the society of professional economists titled “UK Monetary Policy Outlook”. In an interview given on Friday, post the BOE’s rate decision, Pill said the central bank may have to take further action if higher wages and other domestically driven inflation pressures prove more persistent than is currently being forecast.


The euro has gone into a consolidation phase against the dollar, fluctuating in a narrow range. The single currency lost some ground yesterday when European Central Bank policymaker Francois Villeroy de Galhau said markets may have over-reacted to what they see as a hawkish pivot from the ECB. The Bank of France governor told the French National Assembly that market reactions to last week’s ECB meeting were “very high and too high”. President Lagarde’s comments at a press briefing last week caused traders to bring forward expectations for interest rate hikes, however her emphasis on Monday that any move would be “gradual” was largely ignored. Official data released his morning showed that Germany’s trade surplus fell for the fifth year in a row in 2021, as global supply issues hampered exports, including the key auto sector.


The dollar remains largely unchanged against its rivals in early trading although it has eased slightly in tandem with the benchmark 10-year treasury bond yield, which climbed to their highest level since August 2019 on Tuesday. Perceived risker currencies have benefited from easing concerns over a military conflict between Russia and Ukraine. President of the San Francisco Reserve Branch Mary Daly said on Tuesday that inflation could go even higher in the US, before getting better. Daly’s comments come ahead of tomorrow’s key consumer inflation data, which could determine how aggressive the central bank is at its March meeting. Later today Lorretta Mester, head of the Fed’s Cleveland branch is due to speak.

Economic Calendar

13:10pm GBP BoE’s Huw Pill speech
17:00pm USD Fed’s Mester speech