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The Euro-zone Sentix investor confidence index retreated to 16.9 for October from 19.6 previously and below market expectations of 18.5. The data reinforced concerns that higher energy costs could undermine the economic outlook. The European Commission will meet next week to discuss energy crisis measures.

ECB vice-president de Guindos stated that the Delta variant had not had the expected impact and expects strong growth for the third quarter, but he did warn that the expansion has lost some strength due to supply constraints and higher energy costs. He added that the central bank will decide on PEPP alternatives in December if needed. Markets will continue to monitor central bank rhetoric given further upward pressure on inflation in the short term.

The dollar was unable to make any headway ahead of the New York open, especially with gains in commodity currencies limiting potential US support.

US factory orders increased 1.2% for August after a 0.7% gain the previous month with little impact ahead of Friday’s key US jobs data.

Wall Street equities dipped sharply after the New York open, but the dollar was unable to secure defensive demand and the Euro posted net gains. Any sustained underperformance in US equity markets could be a significant element undermining support for the US currency. Developments surrounding energy prices will continue to be watched closely with a particular focus on the relative impact on US, European and Asian economies.

The Euro strengthened to highs at 1.1640, but there was a correction around the European close as rapid losses in US stocks did trigger an element of US support.

The dollar secured a further net recovery on Tuesday with the Euro trading just below 1.1600 as the US currency advanced against commodity currencies.




New Japanese Prime Minister Kishida stated that he will swiftly compile an economic support package. The yen overall lost ground into the New York open with risk conditions attempting to hold firm with the dollar trading above 111.00 while the Euro traded to highs around 129.40.

US Treasuries edged lower after Wall Street open, but there was a sharp slide in US equities which pushed the US dollar lower, although there was support near 110.80. Markets continued to monitor US fiscal developments with further meetings between White House and congressional officials to secure an increased debt limit.

Final Japanese PMI services data remained in contraction for September, although overall confidence strengthened to 3-month highs with a stronger increase in employment. Chinese markets remained closed for a holiday which dampened activity, but Asian equities overall retreated which undermined risk appetite. The yen held a firm overall tone, but the dollar was able to secure net gains to 111.20 amid wider gains with the Euro just below 129.0.  




Sterling was able to post net gains into the New York open with further considerations that the sell-off last week had been over-done. There were also expectations that higher inflation would force the Bank of England to raise interest rates and higher nominal yields helped underpin the UK currency despite very negative real rates.

UK Brexit Minister Frost stated that everything needed to be tried before triggering Article 16 and pulling out of the Northern Ireland protocol with market concerns kept in the background for now. Sterling was broadly resilient after the New York open despite a sharp retreat in US equities.

Sterling strengthened to above 1.3600 against the dollar while the Euro retreated to lows near 0.8530. There was paring of gains around the European close as equity markets moved sharply lower. Sterling was unable to regain traction on Tuesday and traded just below 1.3600 against the dollar with global risk conditions continuing to dominate market developments. Domestically, markets will continue to monitor developments surrounding energy prices.




Swiss consumer prices were unchanged for September compared with expectations of a 0.2% increase with the year-on-year rate held at 0.9% compared with expectations of an increase to 1.1%. The data will maintain National Bank reservations over potential deflation pressures.

Swiss sight deposits, however, declined to CHF714.2bn in the latest week from CHF714.5bn the previous week which again suggested that the central bank had not been intervening significantly to weaken the Swiss currency.

The franc gained ground during Monday and there was notable out-performance compared with the Japanese yen. The Euro dipped to around 1.0730 against the franc before a slight recovery with the dollar retreating to below 0.9250 before a recovery to 0.9265 on Tuesday with fragile risk conditions continuing to underpin the franc.

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