A quiet day for the UK today following a busy end to last week. The pound initially had fallen to well below 1.25 and was boosted by the less dovish tone from the Bank of England committee pushing the pound up a solid 100 points against the euro. This was also helped by Draghis comments last week that the ECB would need to raise inflation as fast as possible!
This morning German business confidence unexpectedly rose for the first time in seven months after Europe’s largest economy returned to growth. German gross domestic product increased 0.1 percent in the three months through September after a contraction in the previous quarter, and investor sentiment climbed for the first time in 11 months in November. Even so, the pace of the recovery remains sluggish and the Bundesbank has said the economy will lack momentum at least until the end of the year.
Mario Draghi is about to find out just how urgent his call for action has become. One week after the European Central Bank president vowed to revive inflation as fast as possible,” policy makers will receive a glimpse on just how feeble cost pressures are now in the euro region. Economists forecast data on Nov. 28 will show consumer-price growth matching the weakest since 2009.
The inflation rate has held below half the ECB’s target of just below 2 percent for the past year, spurring interest-rate cuts as well as programs of long-term bank loans and covered-bond buying, with purchases of asset-backed securities starting last week.
The only other notable release is the preliminary estimate of the US Markit services PMI for November. This index has fallen for the past four months from 61.0 in June to a still very solid 57.1 in October.
While the US week is a shorter one with Thursdays ‘Thanks Giving’ holiday and a relatively light week for significant UK releases, developments in the euro area are likely to dominate market interest.
MORNING MARKET RATES:
GBPEUR 1.2602
GBPUSD 1.5639
EURUSD 1.2407
GBPSEK 11.676
GBPAED 5.7464
GBPAUD 1.8083
EURGBP 0.7932
GBPJPY 184.88
GBPTHB 51.372