Sterling jumped 0.2% this morning on the release of unemployment figures. Data published by the ONS showed that the ILO Unemployment Rate dropped to 4.3% in September from 4.5% in August. This beat the market expectation of a drop to 4.4%. Additional data showed that the Claimant Count Rate edged lower to 5.1% in October from 5.2%. Meanwhile, Bank of England Governor Andrew Bailey spoke before the UK Parliament Treasury Select Committee yesterday. Bailey said that he was very uneasy about the inflation outlook and that all future policy meetings are now in play for a rate rise. Elsewhere, European Commission Vice President Maros Šefčovič said that the latest meeting with UK Brexit Minister Lord David Frost was much better than last week. This was supported by Boris Johnson saying that an agreement with the EU was possible and there was hope that a settlement can be agreed on the Northern Ireland Protocol. Despite this, the possibility of a breakdown in talks continues to cap any major sterling gains.


The euro hit 16-month lows against the dollar on Monday amid concerns of a rise in cases of Covid-19 on the continent and further comments from the ECB head Christine Lagarde. The ECB chief again reiterated that now was not the time to tighten policy as it could choke off the euro zone’s recovery, stating “it could cause far more harm than it would do any good”. Lagarde admitted the inflation spike will be higher and longer than once thought but maintained it would fade next year. Lagarde speaks again this afternoon which investors will look to for any more clues on timing of policy. Market participants will also keep a keen eye on Eurozone Q3 GDP released today at 11am.


The US Dollar Index hit new 2021 highs on Monday having seen a jump in US yields and better than expected prints from the NY Empire State Index. Despite this, the dollar highs of 95.60 hit yesterday have been erased as the index returns to 95.40 this morning following a risk-on market mood. The dollar eased broadly against riskier currencies as talks between US and Chinese leaders seemed to have an amicable start. Chinese President Xi Jinping called US President Biden an “old friend” as he suggested the 2 countries must increase communication and cooperation. Another factor affecting the dollar is the talk around Biden’s imminent appointment of the next Fed chair – probably either a reappointment of Jerome Powell or a promotion for Fed Governor Lael Brainard. A pick of Brainard could see a short term fall in the dollar as it is widely believed a Brainard-led FOMC would be more dovish than otherwise. This afternoons release of Retail Sales for October could see some volatility.

Economic Calendar

11:00 am EU Gross Domestic Product Preliminary (Q3)
14:30 pm US Retail Sales (MoM)(Oct)
18:10 pm ECB President Lagarde speech