Sterling managed to pare some losses against the dollar yesterday, snapping a 3-day losing streak and remains steady against both the greenback and the euro in early trading. However, Brexit concerns and risk averse sentiment is likely to cap any major gains for now. The Times reported overnight that UK foreign secretary Liz Truss is set to ditch large parts of the Northern Ireland protocol after giving up on talks with the European Union on a Brexit deal. Officials working for Truss have drawn up legislation that would unilaterally remove the need for all checks on goods being sent from Britain for use in Northern Ireland. The legislation would also allow businesses in the province to disregard EU rules and regulations and take away the power of the European Court of Justice to rule on issues relating to Northern Ireland. The report concluded that Truss believes that the European Commission Vice-President, does not have the mandate to agree an acceptable deal to the UK. The pound showed little reaction to The British Retail Consortium (BRC) survey released earlier which showed that shoppers feeling the hit from surging inflation cut their spending for the first time since early 2021, when the country was under a covid lockdown. Prime Minister Boris Johnson’s speech at today’s State Opening of Parliament will be closely watched for any Brexit related comments.


The euro was helped by a rebound in risk sentiment yesterday, gaining around 0.5% against the dollar, and remains steady ahead of the release of economic surveys for the Eurozone and Germany. The ZEW Economic sentiment survey finds deviation between optimistic and pessimistic institutional investors. Reuters reported this morning that German officials are preparing for any sudden halt in Russian gas supplies with an emergency package that could include taking control of critical companies. The preparations being led by the Ministry for economic affairs show the heightened state of alert about supplies of the gas that powers Europe’s biggest economy and is critical for the production of steel, plastics and cars. Russia accounted for 55% of Germany’s gas imports last year.


After losing some ground yesterday, the dollar is consolidating in early trading as markets grow increasingly worried over global growth following poor Chinese economic data, showing the country’s export growth had slowed to the weakest in two years. Demand for Chinese exports is under pressure from high inflation and interest rate increases in the US, that have led to consumer uncertainty about the economic outlook. Traders are also worried that the government’s “zero-covid” policy will disrupt global trade. Meanwhile, Minneapolis Fed President Neel Kashkari said yesterday that the US central bank may not get as much aid from easing supply chains as it is hoping for in helping to cool inflation. President Joe Biden will give a speech later today on his efforts to stem inflation as spiking prices threaten the Democrats chances of holding onto Congress after mid-term elections.

Economic Calendar

10:00 EUR ZEW Survey Economic Sentiment
10:00 EUR GER ZEW Survey economic Sentiment
12:40 USD Fed Williams speech
15:00 USD Treasury Sec Yellen speech
16:30 USD President Biden speech