The dollar dials back
The pound has gained steadily on the dollar this week and is now nearly a cent better than it opened on Monday. Against the euro, it is trading broadly sideways in quite a tight range. These moves are not overly surprising ahead of what promises to be an interesting outcome to the Bank of England’s Monetary Policy Committee meeting tomorrow.
The Old Lady seems likely to raise the base rate by .25% for the first time at consecutive meetings since 2004, which should underpin sterling. Although after the surprises at their last two meetings, nothing is certain!
It was all about the euro yesterday as the single currency performed well once again, particularly against the dollar. The unemployment level for the bloc was released, which was better than forecast and is now lower than it was before the start of the pandemic. When taken in combination with combined with rising prices across the eurozone, traders are starting to ponder whether the European Central Bank will start to waiver from its “inflation is transitory“ mantra.
With only a day until we find out, we will be watching out for the Eurozone Consumer Price Index, released later this morning, to see if the figure will give another nudge to the ECB to think about tightening policy.
The dollar has softened this week as speakers from the Federal Reserve seem to be backtracking on last week’s hawkish press conference performance by Jerome Powell. Governors James Bullard and Patrick Harker were the latest to dial back on the expectations of a .5% rise by the Fed in March, and the dollar again eased as a result which it has continued to do overnight. Bullard also warned that this Friday’s jobs report may show some weakness, although he added “don’t be fooled” by it.
Today we get to see the first of this week’s triumvirate of employment reports when ADP release their white-collar report. It is not always the most reliable, and forecasts are for a low figure due to the impact of Omicron.