October 10, 2022

Daily Report 10/10/2022

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According to Bank of England Deputy Governor Ramsden, the central bank must stick to its plan to quash inflation even if it means more pain for the economy. He also stated that the economic stimulus plan and big moves in asset prices would have a material impact on the bank’s November forecasts. He added that the central question was how forceful the bank needed to be to ensure that inflation returns to target. Markets expect that there will be a substantial rate hike in November. The rhetoric had little impact on Sterling with a lack of overall confidence in the UK economy still struggling for support. Risk conditions also remained a key element for the Pound and a slide in equity markets after the US jobs data amplified UK losses. CFTC data recorded a small net increase in short Sterling contracts to just below 50,000 contracts in the latest week from 46,400 previously.

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The Euro held steady into Friday’s New York open with equities ticking higher, although narrow ranges inevitably prevailed. CFTC data recorded a further net increase in long Euro positions to near 44,000 contracts from just below 34,000 the previous week, maintaining the scope for renewed Euro selling. There was little change on Monday as the dollar remained in strong demand. Markets remained uneasy over the Ukraine situation with concerns over aggressive Russian retaliation after the attack on the bridge from Russia to Crimea.

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US non-farm payrolls increased 288,000 for September and above consensus forecasts of around 265,000, although the August increase was revised down to 275,000 from 308,000. Manufacturing jobs increased 22,000 while there was a small decline in retail jobs and government employment dipped 25,000 on the month. According to the household survey the unemployment rate declined to 3.5% from 3.7% the previous month and below expectations of 3.7%. The number of employed increased just over 200,000 while there was a small decline in the participation rate for the month. Average hourly earnings increased 0.3% on the month, in line with consensus forecasts with the annual growth rate slowing to 5.0% from 5.2%.

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