Governor of the Bank of England: "The Hard Yards"

GBP

A quiet start to the week saw sterling edge higher against the euro and the dollar. Buyers were encouraged after Andrew Bailey, Governor of the Bank of England, gave a surprising speech late in the day. In the speech, which was titled “The Hard Yards”, he stated that there could be an interest rate hike before quantitative easing ends which raises the intriguing prospect of a move this year.

With no fresh macro-economic data scheduled, traders will be listening out for further comments on the recovery from Andrew Bailey when he speaks later.

EUR

The euro unsurprisingly slipped yesterday after the result of Sunday’s German election confirmed that the country will be in limbo for some time whilst the political parties attempt to put a coalition together. At the moment, the favourite outcome looks to be a coalition between the centre-left SPD and the Greens, which would usher in a more fiscally relaxed government than the markets are used to.

There is no significant economic data scheduled for release today, but the ECB has plenty of opportunities to put its points of view across with speeches from its President Christine Lagarde, Isabel Schnabel, Luis De Guindos and Fabio Panetta.

USD

The dollar gave back some recent gains on sterling as fears over the financial health of the Chinese property developer, Evergrande, receded and the risk sentiment improved. EURUSD weakened as expected as the political uncertainty in Germany, the heart of the Eurozone, unsettled investors in the single currency.

The dollar was also helped higher by a rise in yields on the benchmark US 10-year bond to its highest level for over three months. As with the rest of the world, there is a lack of tier one data scheduled, with September’s Consumer Confidence being the highlight. The event we will be watching out for today will be Fed Chairman Jerome Powell’s and Treasury Secretary Janet Yellen’s testimonies to Congress about the economy.