Good morning,

All eyes were firmly focused on the European Central Bank yesterday with ECB President Christine Lagarde delivering her remarks on the current expansionary monetary policy. Markets were looking for a more hawkish upbeat tone to help drive EUR strength, but price action was muted given the slightly more dovish tone.

Being the first meeting since the new strategy was implemented, market participants were looking for some forward guidance around the Pandemic Emergency Purchase Programme (PEPP). However, what did come out of the meeting was the view on the current inflationary pressures that most, if not all central banks seem to be battling with at present. The ECB chief said that the inflation measures needed to reach “two per cent well ahead of the end of its projection horizon and sustain itself for the rest of the projection horizon” – effectively echoing the tone of the BoE and Federal Reserve that the pressures will not be long lasting and are somewhat transitionary. Naturally, there was also no change to the overnight lending rates and also the asset purchase programme (APP).

Outside of this, there was little else of note which was reflected in the lack of price action for the single currency.

Across the pond we had some employment data released with US Initial Jobless Claims unexpectedly rising to 419k against the previous figure of 368k, putting this months reading at the highest level in eight weeks which caused some sell action on USD, alleviating the current increase in demand for the greenback coming from a flight to safety following concerns of the Delta variant.

Data today is limited to EUR drivers with German Flash Services and Manufacturing PMI data expect at 59.4 and 64.2 respectively.

Have a great weekend.

Author: Joshua Nagenthiran, Senior Relationship Manager

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