GBP

Sterling snapped a four-day losing streak against the dollar yesterday and has managed to retain those modest gains in early trading. Against the euro, the pound lost ground as the single currency gained across the board supported by “hawkish“ comments from ECB policymakers. Prime minister Boris Johnson vowed to fight on to the election this morning ahead of a major vote in the House of commons today, to decide whether he should be investigated for misleading parliament over breaking covid rules. MP’s will vote on a motion put forward by the Labour Party, which if passed would refer the Prime Minister to parliaments Committee of Privileges to consider whether his conduct amounted to a contempt of the House of Commons. According to the chief economist at Britain’s leading business representative body, the Bank of England has been slow to get ahead of rising inflation which will slow the UK’s economic recovery. Rain Newton smith, chief economist at the confederation of British Industry (CBI) told City A.M that the central bank should have acted sooner in the autumn, and it feels like they have been playing a game of catch up over the last few months. Her comments come ahead of Governor Andrew Bailey’s speech this evening in which he is expected to defend the BOE’s approach to managing inflation.

EUR

The euro has come in for broad support, gaining almost a cent against the dollar and around 0.5% against sterling since yesterday’s opening. The single currency has been buoyed by “hawkish” comments from several European Central Bank board members. This morning, ECB vice president Luis de Guindos was interviewed by Bloomberg and said the central bank should be able to phase out asset purchases in July to pave the way for an interest-rate increase as early as that month, and Governing council member Pierre Wunsch said while the war in Ukraine presents significant risks to the economy, it probably won’t stop the ECB from raising borrowing costs to react to a series of unexpectedly strong inflation readings and interest rates could turn positive by the end of the year. These comments echoed those yesterday by Latvia’s central bank head Martin Kazaks who said a rate hike is possible by July. Traders will now focus on ECB head Christine Lagarde’s speech at the IMF Spring Meetings later today.

USD

Pressured by a sharp decline in US treasury bond yields, the dollar has weakened against its major rivals. The benchmark 10-year treasury yield fell 3.5% and the dollar index lost 0.65% before steadying. Furthermore, mixed comments from Federal Bank officials did little to help the greenback. Chicago Fed President Charles Evans noted that he was not expecting inflation to drop back to 2% next year but added that there was good reason to think that the special factors driving inflation would ramp down. Commenting on the rate outlook, San Francisco Fed President Mary Daly noted that it would be “abrupt or surprising“ to see the policy rate rising to 2.5% this year. Traders now await Federal Reserve Bank Chairman Jerome Powell’s speech this afternoon, Powell is speaking along with several Central bank heads at the IMF spring meetings.

Economic Calendar
13.30 USD Initial Jobless claims
15.00 USD FED’s Chair Powell speech
16.30 GBP BOE’s Governor Bailey speech
17.00 EUR ECB’s President Lagarde speech