Nervous times for Sterling
Sterling is continuing to suffer from concerns over whether the latest Covid variant will slow down the course of the Bank of England’s projected policy tightening and is drifting slowly easier. With the true picture of the potential threat of the Omicron variant unlikely to appear for some time, the market will struggle to establish a direction.
Whilst we all wait for clarity, and with no economic data on the horizon, sterling remains at the mercy of changes in risk sentiment, as was evidenced late yesterday as sterling fell in tandem with the US stock markets.
The euro is trading in quite a tight range at the moment but gradually gaining on sterling. However, there was some downbeat data yesterday when Germany released October’s Retail Sales, which were worse than expected. Also, Markit published the final readings of its November Manufacturing Purchasing Managers Indexes which saw the German number downwardly revised.
Today Eurostat will publish October’s Eurozone Producer Price Index and Unemployment. Also on the agenda is a speech from the European Central Banks’s Fabio Panetta.
The dollar traded sideways yesterday and has continued to do so broadly overnight; however, it gained some traction as stock markets fell during late trading on Wall Street. Jerome Powell refrained from commenting further on inflation during his testimony, but Federal Reserve spokespersons John Williams and Loretta Mester voiced their concerns over it.
The ADP private payrolls number, released yesterday, beat estimates which some will take as an indicator for Friday’s more important Nonfarm Payrolls data, but it is often an unreliable friend. The ISM employment Index also exceeded estimates.Today we have the next of this week’s three employment reports to look forward to when the weekly jobless total is published.