Sterling has begun the week trading within a narrow range against both the dollar and euro. Main market focus this week for the pound will be the release of inflation data in the form of the Consumer Price Index released midweek. Also, on Wednesday Finance Minister Rishi Sunak will deliver a Spring Statement on the public finances and his tax and spending plans. Speaking to BBC television on Sunday, Sunak hinted that he may slash petrol duty to help motorists but warned that the Ukraine crisis and sanctions on Russia would only add to the country’s economic problems.
The euro remains relatively unchanged against its major currency pairs in early trading following a speech by European Central Bank President Christine Lagarde this morning. Speaking before the Institut Montaigne today, Lagarde dismissed risks of stagflation in the Eurozone. Stagflation is a situation in which inflation remains persistently high along with high unemployment and the economic growth rate slows. Lagarde also told the French independent economic think tank the ECB monetary policies will not be in sync with US central bank policy. Fellow policymakers sounded slightly more “hawkish” at the weekend with ECB Vice President Luis de Guindos telling a German newspaper, “the European Central Bank will take action if it sees second-round inflation effects and a de-anchoring of medium-term inflation expectations,” and along the same lines Governing Council member Klaas Knot commented in French financial newspaper Los Echos that “Market expectations of an interest-rate increase ‘later this year’ are quite realistic”.
The dollar found some demand when The Kremlin issued a statement this morning, saying that there is no basis for a possible meeting between President Putin and President Zelensky, as there needs to be significant progress made first. Risk market sentiment will appear to drive the greenback throughout the day. Ahead of US President Biden’s travel to Brussels to participate in a NATO summit this week, the White House announced on Sunday he will hold a call with French President Emmanuel Macron, German Chancellor Olaf Scholz, Italian Prime Minister Mario Draghi, and British Prime Minister Boris Johnson where they are expected to discuss new sanctions against Russia including imposing an embargo on oil.
No major economic releases today