The Euro stays under pressure

GBP

Sterling gained further ground against the euro yesterday and is now flirting with the highest level it has seen this year. It was supported by comments from the Bank of England's new chief economist Huw Pill who said that "…the magnitude and duration of the transient inflation spike is proving greater than expected." The last time the pound was at these levels, in August, it retreated quickly.

With this in mind and market-moving economic data released in the US this afternoon, we would recommend that you talk with your account manager this morning if you are looking to buy euros and take advantage of these levels.

EUR

The minutes from the last European Central Bank (ECB) meeting were released yesterday and reported that some members had argued that it was underestimating future inflation. We will be listening to Christine Lagarde's speech early this afternoon to see whether she agrees or is echoing the rhetoric of the dovish council members.

These include its chief economist Phillip Lane, who said yesterday that he believed inflation was "transitory". The market appears to be thinking that the doves will win out and that the ECB won't tighten policy in a hurry leaving the euro at the mercy of, for example, the dollar.

USD

The dollar held its higher levels yesterday despite risk sentiment improving after a bill was passed to extend the debt ceiling until December. Rising treasury yields underpinned demand for the greenback as traders anticipated that this afternoon's employment report will show a bumper increase in new jobs.

After Wednesday's, a strong ADP private payroll report and a solid weekly claims print optimism abounds ahead of today's Non-farm payroll report. This report is the most important economic data released so far this month, and the consensus is for a number in excess of 500k, more than double last month's total. A number of this magnitude would almost certainly give the green light to the Federal Reserve tightening policy, possibly as soon as its next meeting.