GBP

Sterling traded close to recent highs against the USD and EUR yesterday in a day void of any real market moving data for sterling.

The pound has found considerable support of late from a combination of the UK government resisting re-introducing lockdown restrictions, but also, heightened expectations that the Bank of England could tighten interest rates in the UK as many as three times this year taking the interest rate up to 1%.

News yesterday that UK Covid cases fell for the first time in a month to 179,756 and by 5% on the week previous is welcomed news for sterling and will be enough to keep the currency supported for now.

USD

Despite softer than expected US data yesterday the dollar held firm and was supported by the release of the Fed’s minutes on Wednesday, which saw markets price in faster policy tightening from the Fed.

Minutes from the Fed’s December policy meeting released on Wednesday, showed officials were considering tightening monetary policy further as they cited a tighter job market and unabated inflation. This resulted in the dollar appreciating against risk sensitive currencies as money markets began pricing a US rate hike in March at roughly 80% probability.

The latest data released for the ISM Non-Manufacturing Services PMI for December missed expectations of 66.9 to read 62 yesterday. Whilst ISM Services new orders also fell to 61.5 from 65 previously.

Key announcement

10:00 – EUR – Consumer Price Index – Core (YoY) (Dec) – expected 2.5%
10:00 – EUR – Consumer Price Index (YoY) (Dec) – expected 4.7%
10:00 – EUR – Retail Sales (YoY) (Nov) – expected 5.6%
14:30 – USD – Nonfarm Payrolls (Dec) – expected 400,000 jobs to be created