Sterling posted strong gains in early Europe on Tuesday with support from a further rebound in global equities and stronger risk appetite. There was uncertainty over the timing of the UK medium-term fiscal statement. According to the Treasury Committee, the report would be brought forward but Chancellor Kwarteng stated that the plan would be delivered on November 23rd and in line his original timetable. The uncertainty triggered further reservations over policy and pushed Sterling lower. Comments from Prime Minister Truss will be watched closely on Wednesday. The Bank of England bought no bonds at the latest daily auction which rattled the bond market with yields moving higher, although the overall currency market impact was limited although conditions were much less frantic given the much more favourable global backdrop. Sterling gained an element of support from comments by Foreign Secretary Cleverly that there good signs in talks with the EU over Northern Ireland and that a deal could be reached before the controversial protocol Bill becomes law.
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The Euro held a firm tone in early Europe on Tuesday and gradually gained ground during the day with global risk conditions having an important market impact. ECB council member Villeroy stated that interest rates will be raised as much as necessary and that the bank should go to a neutral rate without hesitation by the end of the year. He did add that the bank might slow the pace of hikes in 2023. ECB Lagarde commented that at a minimum the bank has to stop stimulating demand.
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The US JOLTS data recorded a decline in job openings to 10.05mn for August from a revised 11.17mn the previous month which was below expectations of 10.77mn and the sharpest monthly decline on record. The data triggered renewed speculation over a slowdown in the labour market, although the overall evidence is still tentative at this stage, especially as jobless claims have been running at low levels over the past few weeks. The ADP data on Wednesday and monthly employment report on Friday will be watched closely for further underlying evidence on the jobs market and will create further volatility. The weaker job-openings data was significant in undermining the US dollar with significant losses as yields moved lower and the Euro also gained from short covering.
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13.15 ADP Employment Change (Sep) Exp. 200K Prev. 132K
15.00 ISM Services PMI (Sep) Exp. 56 Prev. 56.9