Sterling rises on Broadbent comments
Tuesday 7 December, 2021
Daily Currency UpdateSterling was given a lift yesterday morning as Bank of England Deputy Governor Ben Broadbent reaffirmed the bank's position that inflation is set to increase even further as we head into 2022. In a speech given at Leeds University Broadbent said he expects inflation to “comfortably exceed” 5% early next year and that it could run above the bank's 2% target for up to two years. The chances of a rate hike next week at the Bank's Dec 16th policy decision now seem more likely, especially if the latest CPI number released the day before comes in above target.
The Health Secretary Sajid Javid told parliament yesterday that the Omicron variant is now spreading amongst the community in the UK and that the restrictions on travel will only slow the spread and not stop it. Some experts expect Omicron to be the dominant variant in the UK by early next year. Its ability to evade the current batch of vaccines is still unknown however none of the cases reported so far in the UK have required hospital treatment. GBP/USD is back around 1.3255 with GBP/EUR back above 1.1750.
Key MoversOn the data-front the main event comes from the Eurozone with the monthly German ZEW Economic Sentiment survey result due this morning. The Eurozone’s powerhouse has been hit by a fourth wave of Covid-19 cases which has seen some calling for new restrictions to be put in place. This is likely why we are due to see a fall from the previous months reading.
From the States there is little data of note however President Joe Biden is scheduled to have a call with President Putin of Russia over the apparent build up of troops being seen on Ukraine’s Eastern border. Rumours are circulating that Russia could be planning a full scale invasion at the end of February so the outcome of this call could affect risk sentiment this evening and tomorrow morning. EUR/USD trades lower at 1.1265.
- GBP/USD: 1.3190 - 1.3350 ▲
- GBP/EUR: 1.1705 - 1.1840 ▲
- GBP/AUD: 1.8620 - 1.8800 ▼
- EUR/USD: 1.1200 - 1.1340 ▼