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Columbus Day means quiet start to week

Columbus Day means quiet start to week

As the US is celebrating Columbus Day today (a Bank Holiday), we’re waiting until Wednesday for any important economic data being released and for corporate earnings season getting properly underway. Two Federal Reserve members are due to give speeches today – voting members Lockhart and Evans. Fed Chair Janet Yellen has consistently claimed that a hike this year is likely, but also laid out what appears to be a number of ready-made excuses to be used in the event that the Fed opts to wait. A disappointing earnings season will not help matters and pile more pressure on the Fed to hold off on hiking rates until next year. Currently the market is pricing in only an 8% chance of a hike in October and below a 40% chance by December.

UK data released on Friday morning came out worse than the market anticipated with the goods trade deficit at £11.1bn from a revised £12.2bn the previous month. However, there was an overall increase in monthly exports, but within this data showed that shipments to non-EU countries were down, with a prominent drop in exports to China. Political deliberations will be monitored closely as the debate surrounding the in/out EU referendum endures and strengthens; this could also contribute to Sterling volatility. There was also a sharp drop in construction output of 4.3% for August after a 1.0% decline previously, pushing output to negative for a third quarter. This data did have an impact in weakening Sterling, but the Pound gained some support after comments from Bank of England Governor Carney the previous day.

Any significant data release for Europe isn’t until the end of the week, where the markets anticipate the next CPI figure. Amid recent slumping inflation expectations for the single currency bloc, traders are starting to talk up expectations for the European Central Bank (ECB) to increase its quantitative easing (QE) program. However, speaking early Saturday morning in Peru, ECB President Draghi said that while he is so far satisfied with the ECB’s QE program, he highlighted that it presently appears that it will take somewhat longer than previously anticipated for inflation to come back and stabilise around levels sufficiently close to 2%.

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