Turnaround Tuesday

GBP

Sterling remains under pressure against both the euro and the dollar. Despite the improvement in global risk sentiment, investors continued to be concerned over the rise in cases of the Omicron variant of Covid. The receding likelihood of the Bank of England raising interest rates next week in the face of the new variant is also capping sterling’s progress. With no macroeconomic data released domestically until Friday, sterling will remain at the mercy of its trading partners and news headlines.

EUR

Unlike their counter-parties at the Bank of England, some of the recent spokespeople from the European Central Bank (ECB) are starting to become more hawkish in their views on limiting their asset purchases. The comments come ahead of the next ECB meeting a week today and may be designed to calm fears over inflation from the newly created German coalition.

Today is the last day ECB speakers can make public comments about the policy before their blackout period kicks in. They certainly look like they will take advantage of the opportunity, with Christine Lagarde, Luis De Guindos, and Isabel Schnabel all scheduled to speak.

USD

US stock markets staged a sharp turnaround yesterday and made back all of the losses they suffered during last week’s rout. Risk appetite has returned as traders reassess the danger of the Omicron variant, with many now thinking that whilst it’s a virulent strain, the effects are mild. Sentiment was also helped by moves to ease the raising of the US debt ceiling, which will expire on 15th December. Without a new agreement on the debt ceiling, the US risked entering default.

There are no speakers on the agenda today as the Federal Reserve is in speech blackout mode, and the only data is the latest US job openings numbers (JOLTS). These are expected to be more than 10 million in sharp contrast to the weakness of last week’s US payrolls report.