Volatile Markets Set to Continue

GBP

Sterling broadly traded sideways yesterday as traders started to try and assess the potential impact of the latest variant of Covid until Jerome Powell livened up proceedings. In the first part of his testimony to Congress, he surprised the markets when he expressed concerns over inflation and hinted that the Federal Reserve might tighten faster than anticipated. These comments caused sterling to drop sharply against the dollar and the euro before recovering overnight to open unchanged this morning.

Today Markit is scheduled to release its Purchasing Manager Index for the Manufacturing sector. More importantly, though, will be Bank of England Governor Andrew Bailey’s speech in which we should get his reactions to the threats from the new variant of Covid.

EUR

According to preliminary estimates, EUR: The euro had a good session yesterday morning after EU inflation surged to a record high of 4.9% YoY in November. After Germany also recorded a jump in its inflation figures on Monday, pressure is building on the European Central Bank to trim its lending facilities. However, along with all the major currencies in a volatile afternoon session, the single currency gave up most of its gains against the greenback before bouncing back to where it started.

This morning Germany will release its Retail Sales figures for October, and Markit will publish its Purchasing Managers Indexes for the Eurozone.l report the bloc's Consumer Price Index and Germany's unemployment level

USD

Today is the first day of winter, and the stock markets certainly felt the chill yesterday. After the Fed Chairman, Jerome Powell, expressed his concerns over inflation, yields and the dollar rose, and stock markets fell. It does appear that some of yesterday’s violent move was caused by Powell’s comments being reported just as the market was entering into the London month-end price-fixing.

There could be more nervousness ahead of the second part of his testimony this afternoon when we also get the first of this week’s jobs reports, culminating with Friday’s Nonfarm Payroll. As usual first up is ADP with their report on predominately private sector employment alongside the Purchasing Managers Indexes from Markit and ISM.