GBP: Quietens down and correlates to equity markets
EUR: ZEW economic sentiment does little to perk up the euro
USD: Focus now on CPI
After a busy few days for the UK, markets quietened off yesterday as sterling remained more rangebound. When there is a lack of economic data, we continue to see the path of sterling closely correlated to the equity markets. Yesterday there was nothing of note from the UK, and today is following suit, with Thursday’s GDP numbers being the only Tier 1 economic release due this week.
Markets continue to keep a close eye on the ongoing UK/EU negotiations over the Northern Ireland protocol. Any developments here could shake the market up for sterling.
German ZEW economic sentiment – a key indicator for economic health – was released yesterday with mixed results. Whilst current conditions were well below expectations, the future outlook component showed a healthy beat. This did little to move the euro as it continues to trade near yearly lows. The market is very much focused on when the next interest rate rises happen. Whilst the ECB remains dovish, expectations of a rate rise before 2023 fail to change, the euro remains very much on the back foot.
The producer price index came out yesterday afternoon from the US roughly in line with market expectations, so this leading indicator of consumer inflation had little impact. Eyes will now be on the consumer price index coming out today. Like with PPI, a higher figure will help fuel the hawkish argument that interest rates should rise in the US – which would realistically translate to further dollar strength.
A multitude of bank holidays tomorrow in the US, Canada and France – therefore make sure to get payments out today to avoid delays if sending to these locations.