Good morning,

Sterling is currently facing headwind on more than one front. We have the MPC meeting this week on Thursday where market participants will be looking for guidance around contraction in the monetary policy and increases in the interest rate. However, bets on this have diminished over recent weeks and now the outlook is not as positive as it was this time two months ago. Elsewhere, the Omnicron variant is weighing on the pound with the PM refusing to rule out the tightening of Covid-19 restrictions. Earlier this morning we had some positive unemployment news for the UK with average hourly earnings, claimant count change and unemployment rate being printed at 4.9%, -49.8K and 4.2% against the previous of 5.9%, 58.5K and 4.3% respectively. Nevertheless, given the aforementioned issues, GBP remained flat.

On the continent, the single currency is also up against it with larger appetite for the dollar given both the arrival of the new variant but also due to the more hawkish stance of the Fed. With the ECB continuing its stance of keeping the overnight borrowing rate at historic lows; the central bank divergence is driving flow away from the EUR. Nevertheless, this week has key releases from the three major central banks which will be closely watched by all market participants.

Data for the week ahead is as mentioned, dominated by the final meetings of the year for global central banks. Tomorrow we have the FOMC statement, FOMC press conference and Federal funds rate for the US with Thursday brining the MPC meeting for the Bank of England and also the lending rate and monetary policy statement for the ECB.

Have a good day.

Author: Joshua Nagenthiran, Senior Relationship Manager

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