Daily Market Report 16/10/2013

Trading in the US dollar was relatively choppy yesterday as markets continued to ponder the outcome over Thursday’s deadline to raise the US debt ceiling.

Common view still seems to be that the US will manage to avert a default but given the large impact Thursday’s risk event poses, investors appear to be sitting on the side lines until a decision is made.

Credit rating agency Fitch expressed their concerns yesterday after putting the US’s AAA credit rating on negative watch due the government’s inability to raise the debt ceiling in a timely manner.

The Senate are set to put a proposal forward this morning (US time) that would fund the government through January 15th 2014, and would also suspend the U.S. debt limit until February 7th 2014.

The pound drew support yesterday as the economy’s rate of inflation surpassed expectations by remaining at 2.7% instead of falling to 2.6%.

The euro fell yesterday following mixed ZEW survey on economic sentiment from Germany and the euro zone as a collective. German economic sentiment rose to the highest since April 2010 but euro zone economic sentiment fell shy of expectations.

Overnight the New Zealand rate of inflation rose beyond expectations from 0.7% in the second quarter to 1.4% in quarter three. The data could put upward pressure on the potential to hike interest rates in New Zealand; thus making the currency a higher yield attraction – we could well start to see more dollar demand.

The pound has been boosted further this morning as the number of unemployed people in September fell by 41,700. Although the unemployment rate remains at 7.7%, the figure should provide some encouraging reading for the state of the UK economy as well as giving a good gauge as to when interest rates could rise.

Euro zone inflation has fell in line with expectations this morning as well coming in at 1.1%.

The rest of the day is vacant of any other fundamental data but in the evening we are expecting a speech from Mario Draghi from the ECB and the Fed’s beige book is set to publish a report on the state of the US economy – which given current conditions may not be too positive.

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