- The US dollar remained steady overnight despite mixed US data as markets continue to focus on the upcoming election and the potential impact on the economy. After a weaker than expected JOLTs report, the ADP Private Payroll print came in considerably above estimates at 223,000 versus expectations on 111,000. Whilst there is no strict correlation between ADP and NFP, Friday’s jobless report will be closely scrutinised for further signs of a slowing labor market. US GDP for the third quarter came in at 2.8%, led by a strong US consumer with PCE growing by 3.7%. The greenback was broadly unchanged despite some volatility in treasuries which was in part driven by gilts reacting to yesterday’s UK budget.
- UK Chancellor Rachel Reeves delivered her eagerly awaited budget yesterday announcing GBP 40 billion of tax rises, the largest in a generation with the bulk of the pain going to employers. Borrowing was more than expected which means that the extent of fiscal easing is higher, providing more of a boost to near term growth and supports the case for gradual easing of interest rates from the BoE. The pound was little changed, with GBPUSD dipping a touch to trade in the high 1.29’s once again capped at the 1.3025 area which is providing short term resistance.
- CPI inflation for the euro area came out inline with expectations keeping the ECB on its current interest rate path. ECB Executive Board member Isabel Schnabel said that a “gradual approach to removing policy restriction remains appropriate.” Markets continue to expect the central bank to deliver steady reductions in interest rates in the coming policy meetings amid falling inflation and ongoing signs of a softening of the economy.
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