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The German ZEW investor confidence index recovered slightly to -59.2 for October from -61.9 the previous month and stronger than consensus forecasts of -65.7, but the current conditions index dipped further to -72.2 from -60.5 in September which illustrated that there are still important stresses within the German economy.

Markets were attempting to adopt a forward looking stance, but there were expectations of a further sharp ECB rate increase this month.

The Euro edged lower after the European open, although overall selling was contained with the single currency holding above the 0.9800 level against the dollar.

Overall risk trends had an important impact during the day with the dollar tending to drift lower when equities posted strong gains.

The Euro regained some ground to the 0.9850 after the European close as equities held firm. There was also a sharp decline in natural gas prices on the day with prices sliding to fresh 4-month lows which provided significant net support for the Euro. The single currency was unable to make further headway on Wednesday and traded below the 0.9850 level around 0.9835 with markets monitoring Ukraine developments closely as Russia continued to target Ukraine energy infrastructure.




The dollar maintained a strong tone ahead of the New York open and traded close to 32-year highs above the 129.00 level as underlying yen sentiment remained weak with no actual intervention to support the Japanese currency.

US industrial production increased 0.4% in September after a revised 0.1% decline the previous month and above expectations of a 0.2% increase while capacity use also edged higher. The NAHB housing index declined to 38 for October from 46 the previous month with all components weaker on the month. This was below market expectations of 43 and the lowest reading since May 2020 while, excluding covid, it was the weakest reading for 10 years. The data reinforced expectations of further weakness in the housing market over the next few months.

Minneapolis Fed President Kashkari stated that inflation is much too high and rates could easily get to 4.5% next year and could go higher if there is no progress on inflation, although he added that the central bank won’t need to do as much if there is help from the supply side.

Bank of Japan Governor Kuroda stated that the recent yen weakening has been sharp and one sided and is not desirable for the economy. The yen gained only slight support from the comments given expectations that monetary policy would remain extremely dovish and the dollar traded around 149.35 and a fresh 32-year high.




After posting strong gains into the European open on Tuesday, Sterling was unable to make further headway as underlying sentiment remained very fragile. Significantly, the UK currency was unable to gain further support from a fresh advance in UK equities. There was also little significant benefit from a slide in gas prices to the lowest level for over 3 months. From a peak just above 1.1400, the UK currency dipped sharply to lows near 1.1250.

There was a further shift in Bank of England interest rate expectations with markets now expecting a peak in rates just above 5.0% compared with above 6.0% at the height of the bond-market selling. The central bank denied that there would be a further delay in enacting the quantitative tightening programme and selling gilts.

The central bank stated later that the first gilt sales will take place on November 1st, the day after the government medium-term statement.

Political tensions remained extremely high with Prime Minister Truss under intense pressure and the Treasury warning over a very tough spending round.

Sterling recovered some ground later in the day, but markets were still unconvinced over the underlying currency outlook with further Euro gains to just above 0.8700.

The headline UK inflation rate increased to 10.1% for September from 9.9% and slightly above 10.0%. Sterling dipped after the data to trade just below 1.1300 given expectations of a further squeeze on government spending while the Euro traded just above the 0.8700 level.




The Swiss franc was held in relatively tight ranges during Tuesday with limited net losses during the day as higher yields elsewhere limited support, although there was still notable reluctance to sell the Swiss currency.

The Euro edged above the 0.9800 level while the dollar settled around 0.9950. The franc secured marginal gains on Wednesday with the dollar holding around 0.9950 with risk conditions likely to be a key element for the Swiss currency.

Technical Levels 

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191022 Cal



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