Will fishing spook the market?

GBP

Sterling had a mixed day yesterday, as attention focused on the European Central Bank (ECB), strengthening against the dollar and weakening against the euro. Fishing is back on the front pages after France upped the ante in the row over post Brexit fishing licences by impounding a British trawler yesterday, and with no data released today, this story may be of the main interest to traders.

EUR

As expected, the ECB maintained its dovish stance and looks set to continue to print money beyond December when the current phase of its Pandemic Emergency Purchase Programme is due to end. In her press conference following the regular meeting of the European Central Bank, Christine Lagarde reaffirmed her rhetoric, in contrast to her peers at the Federal Reserve and the Bank of England, that inflation was, to coin a phrase, transitory.

The euro should really have dropped as a result, but with the market short in anticipation of the ECB decision combined with month-end book squaring, it recovered a little ground as traders took profits. Today sees the release of German and Eurozone preliminary Gross Domestic Product and the bloc’s Consumer Price Index.

USD

The dollar weakened yesterday after the third quarter Gross Domestic Product missed estimates and the weekly jobless total disappointed. With Personal Consumption Expenditures jumping to 5.3%, against a forecast of 4.00%, the Federal Reserve faces a quandary next week over how much and how quickly to taper its asset purchases.

Their dilemma is that if they tighten too much, they will damage an already faltering economy.

The US bond market is underlining these concerns and is now starting to price in the possibilities of a recession. The week closes out with Core Personal Consumption Expenditure spending this afternoon and the Michigan Consumer Sentiment Index.