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The headline Euro-zone CPI inflation rate declined to -0.3% for September from -0.2% previously and also below expectations of -0.2%. The core rate also declined to 0.2% from 0.4% and below market expectations of 0.5%. This was the lowest core reading since the Euro was introduced and will reinforce pressure for the ECB to take additional action to underpin both reported inflation and inflation expectations. There is likely to be speculation of further monetary stimulus by the central bank.

Headline US non-farm payrolls increased 661,000 for September after a revised 1.49mn the previous month and below consensus forecasts of 850,000. Manufacturing jobs increased 66,000 on the month, but there was a slowdown in the rate of recovery within the leisure and hospitality sector. The number of government jobs declined sharply as temporary census jobs came to an end. The unemployment rate declined to a 6-month low of 7.9% from 8.4%, although there was a drop in the participation rate and the reported increase in employment was held to 275,000. The data overall suggested a net slowdown in the labour market, although the market reaction was limited given the focus on politics and President Trump. Overall, the Euro settled close to 1.1720 as narrow ranges prevailed with only limited dollar demand.

CFTC data recorded only a marginal decline in long Euro positions, maintaining the risk of further position adjustment if Euro sentiment declines. There were also reservations over Euro-zone coronavirus developments. The Euro edged higher to the 1.1725 area on Monday as potential defensive dollar demand faded.


Risk appetite stabilised during Friday with a paring of US equity-market losses as speculation over the health of President Trump and political implications dominated markets. There was also uncertainty over the impact on potential fiscal stimulus. The dollar overall edged higher to the 105.40 area, although caution prevailed.

Trump was admitted to hospital after the markets closed on Friday and there was confusion over when the first positive diagnosis had occurred and several other senior Administration figures also tested positive which reinforced underlying uncertainty over campaign developments.

There were further discussions over another US fiscal stimulus package, although with no evidence of a breakthrough. Official reports on the health of President Trump were generally positive, although there was a high degree of uncertainty, especially as one of the drugs administered is normally used only in serious cases. Latest opinion polls suggested that Democrat candidate Biden had extended his lead in national opinion polls although, again, there was still a high degree of uncertainty

Overall risk conditions held steady with US equity futures higher which limited yen support and the dollar traded just above 105.50 on Monday.


There were no UK economic data releases during Friday as political considerations dominated. The UK government announced that Prime Minister Johnson would hold talks with EU Commission President Von der Leyen on Saturday which helped underpin expectations of political progress in EU/UK trade talks.

It was also announced that further talks would be held over the next two weeks and, despite some disappointment that there were still important gaps between the two sides, there was also relief that negotiations had not collapsed. Sterling pushed to highs near 1.2950 against the dollar and the Euro retreated to near 0.9050.

CFTC data recorded that speculators had hold Sterling in the week with the largest short non-commercial position for 8 weeks. This will increase the potential for short covering if there is positive news on trade talks while volatility is likely to remain at elevated levels given the political and economic elements.

Johnson and Von der Leyen stated that progress had been made in recent weeks, but that significant gaps remain. They agreed that negotiators should work more intensively in order to try and bridge the gaps. Negotiations will continue over the next two weeks, although talks are still not in the crucial “tunnel” phase. Sterling was hampered to some extent by unease over coronavirus developments, especially with a jump in reported cases over the weekend due to technical considerations. Sterling held above 1.2900 against the dollar on Monday with the Euro around 0.9070 and political rhetoric remaining under very close scrutiny.


The Euro was held in tight ranges on Friday and again settled below the 1.0800 level while the dollar closed just above the 0.9200 level. Narrow ranges prevailed as markets monitored US and European political risks. An increase in Euro-zone coronavirus concerns provided an element of franc support.   

Overall risk appetite held firm on Monday, but the franc secured net gains with the Euro retreating to near 1.0760 while the dollar retreated to 0.9170. Markets will continue to monitor National Bank rhetoric and actions, especially with some further concerns over US opposition to central bank intervention.



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