Currency-wise, the key FX pairs remained limited and rather modest yesterday. Sterling edged higher versus both the US dollar and the euro. This week has been low on the types of data releases that often move markets. In contrast, next week is expected to be packed, with UK and US inflation figures being particularly anticipated.
Market rate expectations in the United States and the Eurozone shifted somewhat higher. Fed and ECB officials emphasised in statements yesterday that they need further signs that inflation will fall to 2% on a sustained basis before reducing interest rates.
Looking ahead, today’s economic calendar is quiet, with no data releases in the UK. December Italian industrial production, which is scheduled this morning, will provide insight into next week’s Eurozone figures. Some of the other main economies in the region have had mixed results, with French output rising rapidly but Germany falling sharply and Spain declining more modestly.
Overall, the Eurozone’s factory sector appears to be under notable pressure, but the general consensus is that Italian output will have recovered following a sharp drop in November. As a result, range trading is likely to continue today on currency markets.