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The German ZEW investor confidence index declined to 22.3 for October from 26.5 previously and slightly below consensus forecasts of 24.0 while the current conditions index retreated more sharply to 21.6 from 31.9 previously with notable supply-side issues. The Euro-zone ZEW index dipped to 21.0 from 31.1 previously.

ECB council member Villeroy stated that the risk remains that we will fall short of the 2023 inflation target rather than exceed it. He added that exiting the PEPP bond-buying programme would not signal the end of an accommodative policy. The Euro was unable to make any headway in early Europe and dipped around the US open.

US JOLTS jobs-opening data recorded a decline to 10.44mn from a revised record high of 11.1mn the previous month and below market expectations of 10.90mn. There was also a slowdown in new hires, but the quit rate increased sharply which indicated a tight labour market and fuelled expectations of higher wages.

Atlanta Fed President Bostic stated that he would be comfortable with beginning a tapering of bond purchases in November. He added that underlying inflation is above the committee’s 2% objective. St Louis head Bullard also backed a November move to start tapering, but wanted the process to be completed in the first quarter of 2022.

Fed vice-chair Clarida repeated the standard line that a gradual taper concluding in mid-2022 may soon be warranted. He added that inflation was running well above the moderate overshoot of the 2% goal and that inflation risks were to the upside. Overall, the bar for a taper on inflation grounds had been more than met while the employment target is all but met. Although the dollar struggled to make headway against commodity currencies, the underlying tone was firm and the Euro retreated to 14-month lows near 1.1520. The Euro edged higher on Wednesday with a return to the 1.1550 level ahead of the US inflation data later in the day.




Wall Street equities were little changed overall in choppy early trading while US bond yields moved lower. The yen, however, came under sustained pressure in early New York and the dollar surged to fresh 34-month highs near 113.80 against the Japanese currency.

Treasury Secretary Yellen reiterated that she expects the higher inflation rate will be transitory, although with caveats that the pressures would not disappear on a 1-2 month view. The latest US CPI inflation data will be watched closely on Wednesday for further evidence on underlying inflation pressures.

Japan’s Tankan manufacturing index declined to dipped to a 6-month low of 6 for October from 18 previously while there was a marginal improvement in the services index to -1 from -2. Core machinery orders declined 2.4% for August compared with expectations of a 1.7% increase.

Chinese trade data recorded a stronger than expected increase in exports, although the import data was weaker than expected, maintaining some reservations over internal demand. There were expectations that Japan would favour a weaker yen and the dollar held around 113.50 on Wednesday as equities drifted lower.




Sterling was unable to make headway after the UK employment data with markets still wary over an increase in energy costs. There was, however, still underlying support from higher US bond yields amid further speculation that the Bank of England would push ahead with an early increase in interest rates.

UK Brexit Minister Frost stated that we are now facing a serious situation on the Northern Ireland protocol and that it will be impossible to move further without significant change. He also commented that he was concerned that the EU ideas will not be enough to do the job first time round. Markets were monitoring the Brexit developments, although the overall impact was limited with the EU set to announce on Wednesday its proposals for easing friction.

Overall risk conditions were little changed during the day, although there were further reservations over underlying inflation trends.

The Euro drifted lower amid a lack of yield support and traded below the 0.8500 level while Sterling was unable to hold above the 1.3600 level against a firm US dollar.

The latest monthly UK GDP data recorded a 0.4% increase, slightly below expectations, but Sterling traded above 1.3600 against the dollar with the Euro near 0.8485.




The Swiss franc lost ground on Tuesday, although it was still broadly resilient given upward pressure on global yields. The Euro edged higher, but was held below 1.0750 while the dollar broke above the 0.9300 level with highs around 0.9315.

Expectations of an accommodative ECB policy stance continued to curb potential selling pressure on the franc. The Swiss currency held steady on Wednesday with a limited net Euro advance to 1.0740 while the dollar held just below 0.9300 amid expectations that the National Bank would look to curb further franc gains.


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