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Single Currency Spiked on Re-Routing of Rate Expectations

  • Several central bankers further reinforced the yawning gap in EZ/UK rate expectations Monday, with the ECB President Lagarde stating that a rate hike in 2022 - as markets are currently pricing - would be very unlikely. This was in stark contrast to an appearance from the BoE governor Bailey, who stressed that a December rate hike was still in play, with incoming labour market data crucial for the next decision.
  • EUR/GBP resultingly corrected lower, with the 50-day EMA support giving way ahead of the close. Recent price action has worked well against a previously bullish near-term outlook, opening initial firm support at 0.8463, Nov 3 low.
  • Elsewhere, a re-steepening of the US yield curve worked in favour of the greenback, which rose against most others and got a decent leg up from the downside in EUR/USD. The USD Index now sits at its best levels since mid-2020, prompting focus to turn to the Fed speakers due throughout the week, with Clarida's appearance Friday possibly being most interesting.
  • UK jobs data takes focus Tuesday, with US retail sales and import/export price indices also on the docket. Markets see little progress being made between Xi and Biden at their virtual summit, but markets will be on watch for any comments on trade or diplomatic relations.
  • Central bank speakers include Fed's Bullard, ECB's Lagarde and BoC's Schembri.

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