Brexit damaging trade with the EU

Lawrence Kaplin
Lawrence Kaplin 09 February 2022

GBP: Rangebound

EUR: ECB members push back

USD: Awaiting key inflation data

Sterling 

Sterling continues to trade in an extremely tight range as the push and pull of higher interest rates versus economic slowdown fears leaves markets uncertain as to the outlook for the Pound. Brexit is back in the news following a report conducted by a cross-party House of Commons committee which warned that increased border checks in place since the start of the year had increased business costs and suppressed trade with the EU and despite many promises from the UK government, they noted the only detectable impact so far was an increase in costs, paperwork and delays.

With no economic data scheduled until Friday’s GDP report, markets will be closely monitoring comments from BoE Chief Economist Pill due later today and Governor Bailey slated for tomorrow.

No economic data is scheduled.

Euro

The euro gave back some of its post rate meeting gains yesterday as ECB members continue to push back against what was a surprisingly hawkish tone set by President Lagarde. Perhaps concern over the immediate sharp rise in European peripheral bond yields caught the Central bank’s attention prompting the Bank of France Governor to state “the market's reaction to the ECB may have been too strong”. Further remarks are expected from other ECB members over the coming days with Vice President De Guindos slated for tomorrow.

No economic data is scheduled.

US Dollar

The dollar had another mixed trading session yesterday as markets await key inflation data set for release tomorrow. Expectations for a number over 7% have supported the greenback as markets continue to ratchet up rate increases expectations for this year, sending Bond yields to their highest level since 2019. We expect the dollar to continue to trade in a tight range until tomorrow’s release. Data released yesterday revealed Q4 2022 US credit card debt rose by the most in history, once again demonstrating the US consumer’s insatiable spending appetite.

No economic data is scheduled.

Elsewhere

After posting seven consecutive weekly gains, the price of oil fell back yesterday after soothing comments from French President Macron over the Russia/Ukraine border issues. Macron was quoted as saying “Putin pledges no new Ukraine escalation”, although this was later denied by the Russian President.

Market rates 

Today's Interbank Rates at 08:08am against sterling movement vs yesterday.

Euro

€1.187

US dollar

$1.355

Australian dollar

$1.894

South African rand

R20.76

Japanese yen

¥156.4

Have a great day. 

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