20131016

Good morning,

European markets had a decent session yesterday, but the US was not able to follow suit as a result of weak Empire Manufacturing, no news on the Debt Ceiling and Fitch placed the US AAA rating on 'negative watch' indicating that the credit quality of the world's biggest economy could be downgraded, leading to further risk aversion. This lead to USD-gains as flow entered Fixed Income markets as investors are looking for safe havens. In the Asian session, markets were mixed with Nikkei and ASX higher while the Hang Seng in China went lower, down 0.6% in time of writing. FX markets saw the the classic risk aversion trades being in place with the generally stronger US Dollar, JPY and CHF against most peers, however the AUD remained on the bid in the aftermath of the bullish RBA minutes.

From the UK, yesterday's inflation figures showed that the bias in consumer prices is skewed to the upside, which could have an effect on spending and output. Today's employment figures at 08:30GMT will be very interesting, as inflation also could have an effect here and in addition, BoE Governor Carney announced that the forward rate guidance is related to employment. The ILO Unemployment rate is expected unchanged at 7.7%, but any improvement in the underlying claims figures should be positive for the Sterling - Cable is still flirting with trend support from the July lows, currently at 1.5986.

From the US, the focus will be on continued talks on the US debt ceiling and today's inflation report on CPI will be postponed until the government shutdown has been resolved.