Currency markets are being dominated by equity markets at the moment, given the lack of economic data or event risk. Investors continued to recover from the shock of US non-farm payrolls data released. Comments from one US policymaker helped to limit dollar losses and there are two Federal Reserve speakers on the agenda. Both are considered to be hawks and therefore likely to shrug off the disappointing payrolls release. That could provide some late-day support for the dollar after US retail sales figures are released. In the eurozone, inflation figures will be released in several countries, but the data’s impact on currency markets is expected to be minimal at best. The anticipation of UK inflation figures has already pushed sterling to two-week lows against the euro and sent it lower against the US dollar. Sterling could face additional selling pressure if prices fall too rapidly, which would prompt speculation over additional monetary policy measures at the BoE.

Sterling

Inflation is expected to come out in line with last month’s release at 2.1 per cent y/y. That is the closest inflation has come to hitting the bank’s target in years. Inflation has averaged around three per cent for at least the last three years. Sterling could come under selling pressure heading into the release. Weak price pressures will leave open the possibility of further stimulus at the BoE if required and could dent the currency. Already sterling has opened up at three-week lows against the euro. The Telegraph has suggested that the credit rating of the UK could be damaged if Scotland votes for independence.

US dollar

Comments from the Federal Reserve’s Denis Lockhart provided some direction in a directionless market. The policymaker said that the jobs report, that showed the smallest number of jobs created in three years, was not enough to alter the Federal Reserve’s vision to taper its QE programme. And while release of retail sales will dominate attention, two Federal Reserve speakers are scheduled to give comments that could include their outlooks for the upcoming policy meeting.

Euro

It’s hard to say whether a variety of inflation figures form Germany, Italy and France will enliven deadbeat markets that are still trying to recover from disappointing US non-farm payrolls report. Rather FX markets are likely to be driven by equity market movements which alter risk appetite.