Will Boris help sterling?
Yields on the UK 10-year gilt touched 1.09% yesterday, its highest level since May 2019, as gas prices again soared, increasing concerns over inflation. After its latest move, the cost of gas has tripled in the last two months, and it is now trading at an equivalent of over $200 a barrel of oil, three times the price of crude.
As would be expected with an increase in yields, sterling rallied in particular against the euro. With a relatively quiet day for data, apart from Markit's construction Purchasing Manager's Index this morning, the market's eyes will turn towards Manchester, where Boris Johnson will address the Conservative Party conference at 11.30.
ECB President Christine Lagarde continued to downplay concerns over inflation in a speech yesterday in stark contrast to her counterparts at the Bank of England and Federal Reserve. Her stance continues to put pressure on the single currency, it's lower this morning against both sterling and the dollar.
Trader's attention will be focused on the European gas markets today to see if there is any response by the EU commission after prices for November jumped 23% to record highs yesterday. This morning's report on September's Retail Sales for the Eurozone is the only noteworthy data to be released today.
The Institute for Supply Management index, tracking economic activity in the service industry, rose above expectations yesterday, encouraging the US stock market to rally, and as it did, risk sentiment improved, and the dollar fell. Later today, ADP will publish the first of this week's US employment reports, and it is expected to show a rise of 430K.
The survey covers workers in the private sector and is often disregarded as an unreliable guide to Friday's Non-Farm Payroll (NFP). However, this month traders may pay more attention to the number. It registered a similar low reading to NFP last month, and some believe a strong recovery in today's number would herald a similar uptick in Friday's number.