Rates as of 0500 GMT

Market Recap

With the US on holiday, risk sentiment improved. Oil prices rebounded and with them, CAD appreciated as did the other commodity currencies too.

The rise in GBP is surprising or perhaps it just illuminates how monetary policy is dominating the market. The UK today is suffering through the first of three alternate day rail strikes, plus a Tube strike just in case you dont take the train to work. The company is offering a 3 raise, the workers are demanding 78 vs inflation currently at 9, forecast to go as high as 11, so either way the workers would lose out. Nor are the rail workers an isolated case; some 3mn workers across different professions are said to be considering the dreaded industrial action aka strikes over pay and working conditions. On the other hand, ministers are seeking to hold public sector pay rises to 2. You can easily see where this is headed.

This is exactly why the Bank of England and other central banks want to prevent inflation expectations from becoming unanchored. If people believe inflation is likely to remain high, theyll demand wage increases that not only cover the inflation that theyve seen so far but also that they expect in the future. Then companies have to raise their prices to cover those wage increases. Then you have a wageprice spiral thats difficult to end. The UK seems to be at the start of this cycle. This may be what the Bank of Englands Monetary Policy Committee meant when they said The…