Sterling Bounces Back

GBP

After hitting a one year low against the Euro and the US Dollar on the back of the Government implementing Plan B to stem the spread of the new Omicron variant, Sterling bounced back. Markets are still very much driven by the uncertainty of this new variant and view any further restrictions potentially impacting economic output, as negative.

Earlier this morning the latest monthly change in UK Gross Domestic Product (GDP) was released. On a monthly basis, the economy grew by 0.1% whereas economists had expected growth of at least 0.4%. The Industrial Production figure was a sombre reading too, contracting 0.6% on a monthly basis.

EUR

The French election is becoming more of a focal point, and we are waking up to more and more headlines that could be considered easy political wins. Brexit is very much a topic of interest and any threats to the current Status Quo could potentially have wider currency-related consequences. Today, Mme Lagarde, the President of the EBC, is giving a speech and is followed by ECB members Sig Panetta and Mr Elderson.

Market participants will eagerly be listening for any nuances signalling whether the recent increase in Covid cases could potentially warrant loser Monetary Policy, or not.

USD

The US Labour Department revealed yesterday that the initial jobless claims in the US went down by 43,000 to 184,000. This is the lowest level since September 1969. President Biden waded into the inflation debate and pre-empted (and possibly gave away) today’s inflation report. He was quoted saying that the prices for energy in November do not reflect current reality and that today’s figure will not give any indication of the expected price decreases in the coming months.

The market now expects President Biden and his administration to take concrete steps to address the recent price increases and potentially proactively try to lower costs for Americans.