13/12/16 - Market Awaits Super Thursday

GBP

Sterling edged up on Monday, recovering some ground lost last week as investors braced for what is shaping up to be a busy week with the latest top-tier UK economic data releases and Bank of England policy meeting. Britain's benchmark 10-year government bond yield rose to 1.50 percent on Monday for the first time since May, and the two-year spread over comparable German yields hit its widest since late October at 93 basis points.

Sterling chalked up its first weekly fall against the dollar in four last week, falling 1.1 percent as British lawmakers said they would stick to Prime Minister Theresa May's timetable for Britain leaving the European Union, dampening investors' hopes for a delayed Brexit.

This week's packed UK economic calendar opens on Tuesday with November's inflation figures, which are expected to show a slight rise to 1.1 percent. Prices are expected to spike much higher next year as sterling's weakness feeds through.

USD

The dollar dipped against the euro and a basket of currencies on Monday, an oil-driven rise in inflation expectations not enough to push on its broader rally as traders worried about the outcome of Wednesday's Federal Reserve policy meeting.

The U.S. central bank is widely expected to raise interest rates this week and market concerns have turned to what signal it will send on further policy tightening. With a hike largely priced in, focus has turned to what signal the Fed will send on further policy tightening next year and the dollar's nearly four percent rally against a basket of major currencies through Friday in the wake of Republican Donald Trump's U.S. election victory on Nov. 8.

Key Announcements

09.30 – GBP – CPI YoY; Forecast at 1.1% against a previous of 0.9%