Good morning,

Sterling off the lows

Currencies were cautious and alert through yesterday’s session ahead of a litany of risks today. Most of the volatility today will not come from the data calendar but more from political jawboning and fallout over monetary policy.

Here in the UK, sterling managed to keep its nose clean yesterday with some buying interest allowing it to pick itself off its recent multi-month lows. We reckon this interest is speculators trimming short positions on the currency ahead of this afternoon’s testimony by Bank of England Governor Mark Carney, BOE Executive Director Alex Brazier and Financial Policy Committee members Kashyap and Taylor.

Governor Carney to testify at 2.15pm

Discussion will focus on the Bank’s reaction to the Brexit vote, ongoing challenges of financial stability – exposure to Italian banks for example – and whether the Bank of England had a ‘Michael Fish’ moment as its own Chief Economist told people last week. Another ding-dong between Governor Carney and Conservative MP Jacob Rees-Mogg is almost guaranteed, especially if the Committee sets about the task of looking for someone to blame.

We will be watching to see what is mentioned about inflation and the risks therein.

Carney et al are due to begin at around 2.15pm UK time.

News from the High Street

Following a trading statement from Morrisons yesterday, Sainsbury’s announced their Christmas figures detailing a 0.1% rise on the year and noted that “The market remains very competitive and the impact of the devaluation of sterling remains uncertain.”

Trump presser due at 4pm

Donald Trump will also take to the microphone this afternoon (4pm UK time) in his first press conference since being elected in early November. The questions will obviously depend on the assembled journalists but we are hoping that he fleshes out his administration’s goals on trade as well as his thoughts on the Federal Reserve’s December rate hike.

This is a golden opportunity for the President Elect to once again shower praise on his cabinet nominations and double down on the message that got him elected. It’s hard to stop once you’ve started naturally and we expect to see the Trump bravado carry him through and the dollar higher.

We can expect questions about his relationship with Russia following the publication of a dossier of accusations overnight.

The Day Ahead

Elsewhere the data calendar is once again rather subdued with UK manufacturing and industrial production numbers due at 09.30 and inflation numbers from Greece and Portugal. The former are likely to confirm that UK manufacturing is in a sweet spot of export growth but pressures remain on the domestic economy whilst the latter will show a rise in inflation courtesy of the relative rise in oil prices. This is a base effect and not the beginning of growth driven inflation within the weaker parts of the Eurozone economy.

Have a great day