Sterling held firm after Wednesday’s European open with a challenge on resistance levels against the dollar. Equities held firm and the UK FTSE 100 index posted a fresh record high which helped underpin Pound sentiment. The RICS housing data reported that 47% of surveyors reported a decline in house prices in January from 42% previously and the lowest reading since 2009, although there were some expectations that the sector would be resilient.
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The Euro posted gains after Wednesday’s European open and moved against the dollar, although it was still unable to generate significant traction. Gains in equites helped underpin the Euro, but there was still a significant element of caution given reservations surrounding the Federal Reserve policy stance. ECB council member Knot stated that headline inflation seems to have peaked, but his main focus was on underlying inflation. According to Knot, if underlying inflation does not materially abate, the current pace of rate hikes may be needed into May. He added that the ECB will move to smaller steps once the bank sees a clear and decisive turn in underlying inflation dynamics. Overall rhetoric has maintained a hawkish policy stance.
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Across the pond, Fed Governor Lisa Cook said that the central bank remains focused on restoring price stability, as inflation is still running too high. She added that they would need a restrictive monetary policy for some time. Also, New York Federal Reserve President John Williams said that the labor market is still very strong and noted that they have more work to do on rates, adding data will determine the path of rate hikes. Finally, Fed Governor Christopher Waller warned that interest rates could go higher than expected. Data-wise, there were no relevant figures to care of. The United States released MBA Mortgage Applications for the week ended February 3, which increased by 7.4%.
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