Sterling is moving up

GBP

Sterling is holding on to its higher levels in anticipation of the Bank of England announcing a rise in the base rate at its next meeting, which is two weeks today. Traders ignored the slight dip in inflation reported yesterday. Instead, they are focusing on the inflationary impact that the recent hike in energy costs will have in the coming months on both industry and consumers.

It is never all good news for a currency, and with no economic data released today in the UK, traders may start to worry about the continuing rise in Covid cases, which may put a cap on any further advances by the pound.

EUR

In contrast to the UK, Europe’s Consumer Price Index slightly exceeded expectations yesterday with a month on month growth of 0.5%. Despite the rise, the European Central Bank still appears to be maintaining a dovish view towards inflation; consequently, the euro will continue to find it hard to advance. The hawks at the ECB lost a powerful advocate yesterday with the German Bundesbank announcing that its President Jens Weidmann was stepping down at the end of the year.

He did, however, have a passing shot at the doves when he warned that Europe should not lose sight of “inflationary dangers”. His resignation presents the parties negotiating the next coalition with another issue to juggle as they need to choose his successor. After yesterday’s plethora of speakers, a quieter day is in prospect with only a European Council meeting on the agenda and Eurozone Consumer Confidence this afternoon.

USD

The dollar has continued to drift lower this week as risk sentiment has improved, and as it has, its safe-haven attraction has waned. Traders are also ignoring, for the time being, the continued rise in US bond yields. Today, being a Thursday, we have the weekly jobless claims to look forward to this afternoon. Ahead of Friday’s blackout period for speeches from members of the Federal Reserve before its next meeting, we have two speakers to look forward to today.

Potentially the most interesting is Christopher Waller, who suggested that the central bank move forward with its timeline for raising rates earlier in the week. The Fed’s Mary Daly is also slated to speak this afternoon.