Trade Pressure Hampers Sterling
Bank of England Chief Economist Haldane highlighted again yesterday that the UK economic recovery was very strong but he did also express concerns over potentially higher inflation. Sterling strengthened after the comments but was not able to hold on to gains throughout the day.
The latest talks over the Northern Ireland protocol made no progress and there was increased pressure from the EU that the UK should comply with the Withdrawal Agreement. The latest EU rhetoric harmed the Pound with the UK currency dropping against its US and European counterparts.
Heading into Thursday the Pound remains on the backfoot. As of writing it sits at the 1.1580 level against the Euro and just below 1.41 against the Dollar.
The Dollar was unable to make any headway ahead of Wednesday’s US open with the currency undermined further by a lack of yield support. The US currency however, secured a significant recovery towards the European close with the Euro also unable to hold above the 1.2200 level.
Today, trading begins with an element of caution ahead of crucial US inflation data with overall currency-market ranges predicted to widen during the day amid positioning and short coverings ahead of key events.
The Euro moved above the 1.2200 level for the first time in over a week as the US currency remained under pressure as commodity currencies also looked to gain.
The latest ECB policy decision will be announced on Thursday with expectations that the central bank would look to adopt dovish rhetoric in order to curb any tightening of financial conditions. According to sources, the ECB will also hold a three-day meeting to discuss the inflation strategy review.
As of writing, the Euro currently trades around the 1.2170 mark against its US counterpart.
Data to watch
12:45 – EUR – Monetary Policy Statement
12:45 – EUR – Main Refinancing Rate
13:30 – EUR – ECB Press Conference
13:30 – USD – CPI
13:30 – USD – Core CPI
13:30 – USD – Unemployment Claims
18:00 – USD – 30-y Bond Auction