A bit of relief in the markets yesterday after the Republicans
last night closed in on a deal with the Democrats to extend the US debt limit
and end the current government shutdown.

The deal will allow borrowing to rise only until 7^th
February, with full federal government funding provided until 15^th
January. There are talks scheduled in mid-December for a longer term deal. The Senate
and House of Representatives are expected to vote this through early morning in
the US.

A bit of relief in the markets yesterday after the Republicans
last night closed in on a deal with the Democrats to extend the US debt limit
and end the current government shutdown.

The deal will allow borrowing to rise only until 7^th
February, with full federal government funding provided until 15^th
January. There are talks scheduled in mid-December for a longer term deal. The Senate
and House of Representatives are expected to vote this through early morning in
the US.

Whilst the immediate concern has been relieved, the deal
that has been agreed has been viewed as a temporary solution. Stock markets and
the US dollar have weakened off as a result as the market view is we would
expect more conflict when talks resume in December.

The impact of the shutdown on US GDP is also being digested
by the market. According to rating agency S&P, about 0.6% has been shed off
4^th quarter growth figures, equating to losing US$24bn from the economy.
This will of course give the Federal Reserve less of a reason  to taper quantitative easing, perhaps pushing
it back further from recent forecasts of tapering to occur in December.

For the time being we would expect GBPUSD to remain bounded
by the highs of October 1^st.

The pound strengthened in early morning trade yesterday on
the back of strong claimant count figures. It was expected there will be a 25,000
reduction, however we actually saw a reduction of 41,700. We also had
unemployment figures remain stable at 7.7% which what was forecasted.

In the Eurozone we had inflation figures out which came in
as expected at 1% year on year.

So the day has begun with the US dollar on the back foot and
the pound continuing to strengthen. Retail sales for the month of September
exceeded expectations rising to 2.2% year on year and 0.6% month on month. The
data suggests that consumer spending is on the rise and thus should support growth
for the UK economy.

The only other data we have is initial jobless claims from
the US which is expected to show the number of people filing for jobless claims
fell by 17,000.

Key Announcements:

13.30pm – USD – Initial Jobless Claims: Expected to fall by
17,000.