The pound was bogged down by the broad US dollar surge in yesterday’s session, with no data out of the UK. The sole economic event was BoE policy maker Silvana Tenreyro speaking at Oxford’s economic society at 14:30 GMT. Despite sitting on the dovish side of the spectrum, Tenreyro reiterated the core BoE message by stating that “modest tightening” will occur over the forecast period, seeing rates at pre-pandemic levels (0.75%) in the medium-term. However, Tenreyro’s comments stopped short of giving direction as to December’s meeting, and therefore fell short of jolting markets. Today, with BoE Governor Andrew Bailey speaking at 17:30 GMT and Jonathan Haskel providing opening remarks at 14:05 GMT, more focus will be on central bank comments, especially with US markets closed for the day.
The euro remained under pressure in yesterday’s trading session despite some relief on the political front after Olaf Scholz was elected by the Bundestag to officially become Germany’s next chancellor. Scholz is set out to steer Germany through the latest Covid wave and transform the nation into a climate leader. In his speech on Wednesday, he stated that the coalitions have resolved “this will be a decade of investment”, which should be positive for the euro over the more medium term. In the very short-term however, the outlook remains clouded and all eyes are on whether Germany and France – the eurozone’s two largest economies – are going to tighten Covid measures through winter. The Netherlands announced yesterday it will bring forward the date of the Covid press conference to tomorrow as the recent lockdown measures have not stopped the surge in case count yet. Expectations are for the government to tighten measures further. The calendar this morning included a sharper-than-expected decline in German GfK consumer confidence, which is reflective of the ongoing uncertainties around the virus. Elsewhere in Europe, markets will watch the Riksbank’s policy decision at 08:30 GMT, where rates are widely expected to remain on hold.
The dollar was on a surge again in yesterday’s session as markets received a deluge of US data before today’s Thanksgiving holiday, where US markets are closed for the day. Data out from yesterday saw US initial jobless claims fall to their lowest level since 1969, but should largely be discarded due to a seasonal quirk, while headline durable goods orders contracted by 0.5% but like initial jobless claims the initial headline reading was misleading. Core durable goods orders, which strip out transportation purchases, rose by 0.5% and show continued Capex spending in the US which should drive a higher and more sustainable growth path and alleviate pressure on the labour market. The string of data was largely positive for the US economic outlook and that was visible in front-end Treasury yields. The 2-year continued its climb above 0.6% yesterday and settled at 0.6398% upon close, with most of the rise driven by the data releases. Yesterday’s November FOMC meeting minutes had limited market impact in this regard, despite the minutes striking a more hawkish tone than the rate statement and Chair Powell in the press conference. The staff’s near-term inflation forecast was revised up, but still is expected to revert back to 2% by Q4 next year, but the risks are to the upside and has led to “some” members already wanting a “somewhat faster pace of reductions that would result in an earlier conclusion to net purchases”. Today, the focus will be on how global markets behave while the dollar is away, with liquidity in the afternoon of the European session likely to drop off and dull market volatility.
Yesterday’s session saw the loonie weaken alongside most other G10 currencies against the US dollar ahead of a series of macro data from the US. The Canadian dollar rebounded this morning, although much of this is due to broader-based USD weakness. Crude oil prices were steady overnight after OPEC’s advisory body projected that a planned coordinated release of reserves may swell a crude surplus early next year. The projections come just a week before the OPEC+ meeting where supply will be discussed going forward. The calendar today is virtually blank and will stay light for the remainder of the week, however, the loonie may join other G10 currencies in making back ground against the dollar as US markets are closed for Thanksgiving.