Sterling continues to test EUR, AUD and NZD

After much excitement earlier in the week; with Sterling testing multi-month highs across much of the basket, performance since Monday has been more subdued, but still broadly positive. Sterling continues to test EUR, AUD and NZD, while beginning to eat into some of the considerable losses against the USD that have occurred in the last 6 weeks.

Political events in the UK may cool appetite in the short-term as investors consider the impact of any potential Conservative party leadership election (although this is far from a guarantee at this point).

US Inflation surges to 7%

US CPI figures were the headline data point yesterday. Headline US Inflation rose to 7% in December as expected and came in broadly on forecast at 5.5% against the 5.4% forecast result. Although not a surprise result necessarily, currency markets appeared to have been braced for a higher than anticipated reading, with the dollar moving lower following the release. Despite this, it will do little to dampen expectation that the Fed Reserve is set to loosen monetary policy and raise rates at their next meeting on the 27th.

Today will be light on tier one data, with the most interesting event likely to be a speech given by Patrick Harker of the Fed. Harker has already gone on record to state his openness to at least 3 rate rises in 2022 so doubtful he will have much to say that could reverse market expectation.

UK GDP figures released tomorrow

For the rest of the week look to tomorrows release of GDP figures for the UK which will give a window into the true growth of the UK economy as we come out of COVID restrictions, and the continue political instability is likely to weigh heavily as we go into the weekend.

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