The pound weakened across the board yesterday following
lacklustre data throughout the weak causing investors to profit take on the
pounds recent bout of strength.

Research firm Markit revealed that services in the UK
dropped marginally to 60.3 in September from 60.5 in August. Another report showed
that house price inflation in the UK only rose by 0.3% instead of an expected
0.5%. Also in the week, we had construction and manufacturing data which also
fell short of expectations, so unsurprisingly we are seeing investor’s book
profits on their long sterling positions.

The pound weakened across the board yesterday following
lacklustre data throughout the weak causing investors to profit take on the
pounds recent bout of strength.

Research firm Markit revealed that services in the UK
dropped marginally to 60.3 in September from 60.5 in August. Another report showed
that house price inflation in the UK only rose by 0.3% instead of an expected
0.5%. Also in the week, we had construction and manufacturing data which also
fell short of expectations, so unsurprisingly we are seeing investor’s book
profits on their long sterling positions.

The euro continued to be well supported following an
aversion of Italy’s political crisis. Adding to this, euro zone services output
hit at a 27 month high as new business picked up and the number of job cuts may
be coming to a halt. It appears that the negative sentiment that has been surrounding
the euro for the last two weeks has seemingly diminished and as a result we may
see a continuation of the euro’s recent gain.

The US dollar had a bit support yesterday as well as the
number of people filing for jobless claims only rose by 1,000 instead of 6,000.
In the absence of non-farm payroll figures today, due to the government shutdown,
the market seemed to focus on these job figures to evaluate what the Fed may do
regarding tapering of monetary stimulus. Services sector figures from the US
fell to 54.4 in September from 58.6 in August.

The next key event for the markets will of course be if
whether lawmakers can raise the debt ceiling by October 17^th.
President Barack Obama still insists that the only way to negotiate on the
budget and to bring the government shutdown to an end is for the House
Republicans to raise the debit ceiling. Sources close to this subject have
hinted that the Republicans may bring in a measure to do this as early as next
week.

With no job figures due for release today due to the
government shutdown the economic calendar seems to be void of any major data
today and as a result we expect to see a continuation of sterling weakness as a
continuation of yesterday’s events.

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