Update, the pound’s now at a new six-week low against the US dollar (at $1.285), as well as a six-month low against the euro (€1.082).

Traders are noting the EU’s firm demand that London must change its internal market bill, and remove parts which violate the Northern Ireland protocol.

Ouch. The pound is dropping further into the red, after the European Commission called on London to abandon plans to undermine the Northern Ireland protocol.

Following a meeting in London, the EC says that the measures in the internal market bill have “seriously damaged trust” between the two sides...and it’s up to the UK side to make amends.

In a statement, the EU says:

The EU does not accept the argument that the aim of the draft Bill is to protect the Good Friday (Belfast) Agreement. In fact, it is of the view that it does the opposite.

Vice-President Maroš Šefčovič called on the UK government to withdraw these measures from the draft Bill in the shortest time possible and in any case by the end of the month. He stated that by putting forward this Bill, the UK has seriously damaged trust between the EU and the UK. It is now up to the UK government to re-establish that trust.

He reminded the UK government that the Withdrawal Agreement contains a number of mechanisms and legal remedies to address violations of the legal obligations contained in the text – which the European Union will not be shy in using.

This has driven the pound back down to $1.29 against the US dollar - wiping out the recovery yesterday afternoon.

Just in: A Wall Street bank has finally appointed a female boss.

Citi has announced that Jane Fraser, the head of its consumer banking arm, has been appointed as CEO. She’ll replace Michael Corbat, who is retiring in February.

As CEO of Global Consumer Banking, Fraser runs Citi’s consumer businesses in 19 countries, including retail banking and wealth management, credit cards, mortgages and the associated operations and technology.

This tweet shows how the ECB expects a less severe recession this year (and a slightly smaller recovery in 2021).

Back in Frankfurt, Christine Lagarde has been asked whether the ECB’s governing council is worried about the strength of the euro (it hit a two-year high last week).

The ECB president replies that policymakers discussed it, but they do not target it -- the Bank’s mandate is price stability.

But... Lagarde adds that the ECB needs to monitor carefully the extend to which an appreciating currency pushes inflation down.

Economists, analysts and commentators all agree that today’s US jobless claims report is disappointing:

Onto price stability...and Christine Lagarde warns that headline inflation will probably remain negative for the next few months.

This is due to “subdued price pressures” -- such as the rise in the euro’s value and a recent VAT cut in Germany.

However, the ECB predicts inflation will turn positive in 2021 (reminder, the target is just below 2%)

Melissa Davies, chief economist at Redburn, says the ECB faces a particularly difficult task in nursing the eurozone back to health, particularly in the eurozone periphery:

“There is no hint of policy change in the ECB’s statement today, leaving Lagarde with the unenviable task of juggling questions about euro strength and the Eurozone’s most recent negative inflation print for August during the press conference.

“The reality is that the ECB has a more difficult job than most central banks in stimulating the economy, with no fully-fledged federal sovereign to coordinate with. National central bank data are showing that core countries, including Germany, are proving able to monetise government spending while periphery central banks cannot. The ECB always has a real problem in trying to stimulate the periphery and, now, in supporting governments to spend.

The ECB also says that it’s pressing on with its €1.35trn programme to protect the eurozone economy from the Covid-19 crisis.

Today’s statement says the pandemic emergency purchase programme (PEPP) should cushion the ‘downward’ impact on prices during the pandemic.

These purchases contribute to easing the overall monetary policy stance, thereby helping to offset the downward impact of the pandemic on the projected path of inflation.

There’s no significant changes in the statement, though, with the ECB also maintaining its quantitative easing programme at €20bn per month (buying government and corporate bonds with newly create money).

A reminder of why the ECB is worried about inflation:

As it met today, the European Central Bank can take satisfaction that the recent divergence in German and Italian bond yields has narrowed steadily since the spring.

This ‘spread’ widened alarming in April, on fears that the ECB wouldn’t help Italy handle the cost of the pandemic. It then narrowed, after officials insisted they were still committed to holding the eurozone together.

Katharina Utermöhl, senior economist at Allianz, predicts the European Central Bank will still need to do more quantitative easing, probably in December.

Dutch bank ING reckons the ECB’s comments about the strength of the euro will be most important today:

With the pound also up against the US dollar, at $1.3025, shares in London are still down.

The FTSE 100 is currently 60 points lower at 5952, down 1%, having closed at a two-week high yesterday.

Every sector has lost ground, led by miners, banks and energy companies. Morrison’s is still the top faller after reporting a 25% tumble in profits during the pandemic, while housebuilder Persimmon is the top riser.

Back in the markets, the euro is holding this morning’s gains ahead of the European Central Bank decision (in an hour).

It’s up 0.25% against the US dollar now, at $1.1835, on predictions that the ECB will sound an optimistic note about the recovery (despite rising Covid-19 cases)

City AM has learned that the Bank of England has spent at least £117,000 on making its historic headquarters Covid-19 safe.

The measures, including temperature scans and new office signage, should allow more staff to return to Threadneedle Street following the lockdown.

The bill includes £14,000 on hand sanitisers, 14,000 worth of new masks, and £8,300 of cleaning products up until June (and probably more since!). It’s a handy reminder of the challenges all offices face in returning to more normal working patterns.

City AM’s Harry Robertson explains:

The Bank of England’s biggest outlay was £56,800 spent on “altering facilities” between March and June. That included buying thermal imaging cameras to scan people’s temperatures at entrances, and screens for catering facilities.

It also spent £18,100 on the sort of signage that has become commonplace during the pandemic. The Bank has put in place circulation routes and separate entry and exit points, among other measures.

More here: Exclusive: Bank of England spends £120,000 making HQ Covid-secure

Last week, top BoE officials warned that it’s not practical, or indeed possible, for all offices workers to return to their desks.

Many of its staff have been working from home for months, executing its Covid-19 stimulus package remotely.

Chris Beauchamp, Chief Market Analyst at IG, says investor are subdued ahead of the ECB’s interest rate decision in 90 minutes.

He doesn’t expect new stimulus measures today, but instead a hint that it’s coming soon:

“European markets are edging lower ahead of the ECB, as the bullish sentiment that was so prevalent yesterday pauses for breath.

“Some will be wondering if the correction of the past week has run its course, which would be in line with the scope and duration of pullbacks for the this rally, or whether the upcoming US election, Brexit and a host of concerns about renewed lockdowns and economic weakness will lead to a more sustained drop into October.

“Today’s ECB meeting should see the bank make at least a passing reference to recent euro strength against the dollar, although firm action is unlikely this time around.

“Instead we will likely see the bank lay out a path to further easing later in the year, responding as needed if and when the initial rebound from the Covid-19 economic shock begins to fade.

With central banks in the spotlight, former UK prime minister Gordon Brown has called for the Bank of England to prioritise job creation.

Brown, who gave the BoE independent control of interest rates after becoming chancellor in 1997, argues that it should target employment as well as inflation - like America’s Federal Reserve.

Brown says:

“All UK institutions have to make high levels of employment a greater priority,”

“Having been the chancellor responsible for the Bank of England Act 22 years ago, I am disappointed that while obligations for employment are included in its statutory objectives, the Bank of England does not place greater emphasis on maximising employment.”

The latest weekly healthcheck on the UK economy shows an increase in people setting up new companies, despite the economic uncertainty.

The Office for National Statistics has also found that a third of employees were working from home, as of the middle of August. IT workers, and scientific and technical staff, were most likely to be based at home, along with education workers (with teachers preparing for the new term).

Here’s the details:

• 36% of the workforce were working remotely and 11% were still furloughed, according to the latest Business Impact of Coronavirus (COVID-19) Survey (BICS) [covering 10 August to 23 August 2020].
  
  
• According to the new indicator, online prices of items in the food and drink basket decreased by 0.1% in the latest week (31 August to 6 September).
  
  
• For a third consecutive month, between June and July 2020, more firms reported increasing turnover than decreasing turnover, in the latest HMRC VAT business turnover returns.
  
  
• In the week starting Saturday 29 August, there was an average of 3,836 company incorporations per working day, an increase from the previous week’s average of 3,066.
  
  
• Between 28 August and 4 September, total online job adverts decreased from 55% to 50% of their 2019 average, decreasing in every region and country of the UK.
  
  
• In the week commencing 31 August, Energy Performance Certificate (EPC) lodgements across England and Wales were 3% lower for existing dwellings and 17% lower for new dwellings than the same week a year ago, although this may be impacted by the bank holiday on 31 August.
  
  
• In the week commencing 31 August, footfall in retail parks remained around 90% of its level the same day a year ago, while footfall in high streets and shopping centres remained a little below 75%.
  
  
• According to traffic camera data, between 31 August and 6 September counts of cars in London have returned to the average level seen immediately pre-lockdown but the North East remained at around 95%.
  
  
• Department for Transport traffic count data show that on Monday 7 September, heavy vehicle traffic was four percentage points above traffic seen on the equivalent Monday in the first week of February, the highest recorded level since the Prime Minister’s announcement on 16 March.
  
  
• Between 31 August and 6 September, the average volume of daily ship visits was 374, an increase from the previous week’s average of 324 daily visits.

Speaking of airlines...the International Air Transport Association has warned that shipping a Covid-19 vaccine around the world will be the industry’s biggest ever challenge.

Around 8,000 jumbo jet planes would need to be deployed to get a single dose to 7.8 billion people, IATA warned today.

My colleague Julia Kollewe explains:

The International Air Transport Association warned of severe capacity constraints that could hamper efforts to get a vaccine out quickly around the globe. While drugmakers are racing to develop a vaccine and get it approved by regulators, the international aviation group is working with airlines, airports, health bodies and pharmaceutical firms to draft an airlift plan.

IATA’s director general, Alexandre de Juniac, said: “Safely delivering Covid-19 vaccines will be the mission of the century for the global air cargo industry. But it won’t happen without careful advance planning. And the time for that is now. We urge governments to take the lead in facilitating cooperation across the logistics chain so that the facilities, security arrangements and border processes are ready for the mammoth and complex task ahead.”

With AstraZeneca’s vaccine trial currently on hold while a volunteer’s illness is investigated, it’s another reminder of the massive challenge ahead.

Covid-19 has dragged the Lloyd’s of London insurance market into the red.

Lloyd’s posted a first-half pre-tax loss of £400m this morning, having paid out £2.4bn billion in coronavirus-related payouts so far this year.

The loss compares with a profit of £2.3 million a year ago.

Lloyd’s expects to pay out £5bn in claims relating to Covid 19 this year. Many companies, though, are unhappy that they’ve not been able to claim on their insurance after being forced to shut.

Lloyd’s chairman Bruce Carnegie-Brown told CNBC this morning that standard insurance policies typically cover physical damage, not pandemic disruption:

“Where pandemic and notifiable diseases are specifically covered in insurance policies, then they will pay, and we’ve been paying claims on those, but they are typically bought as an extension to a standard policy that requires physical damage to a premises before a claim can be made.

“It is that second category that is proving complex around the issue of whether Covid-19 is creating physical damage in the workplace, and that is the issue that is being tested in the High Court and we are very supportive of getting this to an early decision.”

In the City, supermarket chain WM Morrison is the top faller after it posted a 28% tumble in earnings due to the pandemic.

Pre-tax profits at Morrison’s fell to £145m in the last six months, from £202m a year earlier, even though like-for-like sales jumped by 8.7% as shoppers stocked up to get through the lockdown.

Morrison’s ran up £155m of extra costs due to Covid-19, partly mitigated by four months of business rates relief worth £93m. It expects the net cost of £62m to be balanced out by future business rates cost savings.

During the pandemic, it boosted its online and home delivery order capacity fivefold, with five new growth channels: Morrisons.com store pick, food boxes, doorstep, ‘Morrisons on Amazon’ and Deliveroo.

But, Morrisons’ profits were also hit by the closure of its cafes, and the (most welcome) discounts it gave to key workers and farmers:

As well as the timing of direct COVID-19 costs/lower business rates, the mix of the very strong first - half sales growth was weighted towards online channels and lower margin categories.

In addition, fuel sales growth was very negative, our cafés were temporarily closed, and we invested in supporting our colleagues, NHS workers and farmers with extra discounts. We also continued to invest in price cuts, and delayed planned productivity initiatives to focus on our response to COVID-19.

Morrison’s is also delaying deciding whether to pay a special dividend for the last financial year (pre-Covid)

This prudent approach reflects some sustained uncertainty around the potential future impact of COVID-19 on both our customers’ behaviour and the broader British economy.

Shares in Morrison’s are down 4.3% in early trading.

The euro is strengthening a little this morning, suggesting traders don’t expect major moves from the ECB today.

It’s gained 0.2% to $1.1824, back towards the two-year high of $1.20 seen last week.

Lee Hardman of MUFG Bank told clients this morning:

The euro has derived some support from the release of a Bloomberg report stating that ECB forecasts are said to show more confidence in the economic outlook. According to the report, some ECB policymakers have become more confident in their forecasts for the region’s economic recovery, potentially reducing the need for more monetary stimulus this year.

The updated staff forecasts for growth and inflation though are expected to show only slight changes compared to the June outlook.

But, Hardman also thinks the ECB will be concerned about downside risks to their inflation outlook.

While one should never put too much weight on just one inflation reading, the August CPI report was a shocker showing core inflation falling to a new record low of just 0.4%.

With all eyes on the ECB, European markets have made a thoroughly underwhelming start to the day.

In London, the FTSE 100 index dropped by 9 points at the open, while the German and Spanish markets are flat.

There are 10 reasons for the European Central Bank to take a dovish turn today, says Frederik Ducrozet, senior economist at Swiss bank Pictet.

They include: the record low core inflation seen in the eurozone last month, fears that inflation expectations could fall, signs that the eurozone recovery is faltering, the euro’s strength, and global risks such as Brexit and the US election.