GBP

Sterling has lost ground against a broadly firmer dollar, falling around 0.2% this morning and is trading towards the lower end of its recent range against the euro. The pound’s weakness appears to be linked to negative headlines concerning Brexit and the challenges facing the Bank of England who start their 2-day policy meeting today. With opinion polls favouring a Sinn Fein victory in Northern Ireland’s assembly election on Thursday, it would mark a major shift in the regions sensitive political balance and could undermine Prime Minister Johnson’s bid to renegotiate the terms of the UK’s split from the European Union. The Bank of England are closely eyeing surging prices that have already pushed consumer price inflation to its highest in 30 years. This morning’s survey from the British Retail Consortium (BRC) showing that shop prices surged at the fastest rate in 11 years and predicting more rises to come, highlighted the problems facing the central bank, who Governor Andrew Bailey said recently were walking a “tight line“ between curbing inflation and tipping the UK into a recession.

EUR

The euro is trading up around 0.10% against the dollar this morning. The single currency showed little reaction to the widely expected news that the EU will impose further sanctions against Russia. The European Commission President, Ursula Von der Leyen, this morning announced the sixth round of sanctions since the Ukraine conflict began. The proposal which will require approval from all 27 EU countries, included phasing out the Russian supply of crude oil within six months, refined products by the end of the year and cutting major Russian banks from the SWIFT banking system. Russian sanctions were cited as one of the reasons for a fall in Germany’s trade balance figures released this morning. Retail sales for the bloc are released later today.

USD

Markets remain somewhat calm as traders look ahead to the Federal Reserve Bank policy announcements this evening. The central bank is widely expected to hike its policy rate by 50 basis points and unveil its plan for balance sheet reduction. Chairman Jerome Powell’s comments at the press conference, which follow’s the policy announcements, will be scrutinised for any new indications about whether the Fed will continue aggressively raising rates to battle rising price pressures even if the economy weakens. Yesterday’s Job Openings and Labour Turnover survey (JOLT) showed job opening’s increased to an all-time high in March as a record 4.5 million voluntarily quit their jobs, underscoring growing wage pressures. Later today the jobs report for the private sector (ADP) will be released.

Economic Calendar

10:00 EUR Retail sales
13:15 USD ADP Employment change
15:00 USD ISM Services PMI
19:00 USD Fed interest rate decision
19:30 USD FOMC press conference