Daily Market Report 07/10/2013

With the government shutdown preventing the release of the latest job figures from the US, markets were fairly quiet on Friday with the only notable move being continued profit taking on the pound following a week of fairly lacklustre data from the UK.

Pound movements this week will be dictated by industrial and manufacturing production figures, both of which are set to improve from August as well as the Bank of England’s latest monetary policy decision. Expectations are for the Bank of England to keep both monetary policy tools as they are.

The government shutdown in the US and the debt ceiling will continue to remain in focus until a resolution can be found in the political impasse. US Republican speaker John Boehner remains adamant that the House cannot increase the debt ceiling without concessions on issues like healthcare reforms – an issue that the Obama administration is not willing to negotiate on.

Treasury secretary Jack Lew warned yesterday that American would default on its debt if the ceiling cannot be raised before the 17th October. A US default would be unthinkable, given the impact it would have on the world economy. And judging by the lack of further weakness in the US dollar, investors are seemingly optimistic that the US will manage to raise the ceiling in time and thus avert a default. Should the Senate come to an agreement then we would expect the US dollar to regain some of the lost ground it has experienced over the last few weeks.

The calendar is fairly bare today with only the second quarter GDP figures from the euro zone due for release.

Key Announcements:

10.00am – EUR – Gross Domestic Product (Q2): Expected to grow by 0.3%.