Sterling was unable to gain support from the labour-market data, especially with fears that the unemployment would increase sharply over the next few months.
EU Chief Negotiator Barnier stated that some progress had been made in trade talks with the UK but not enough or as much as expected. Irish Foreign Minister Coveney also stated that there were still major difficulties over fishing, but stated that a deal was possible.
Sterling moved lower at the start of the US open, primarily due to the weaker tone in risk appetite and a stronger Dollar. The Uk currency was also unsettled by further scientific and political calls for two-week lockdowns also known as the Circuit-Break Lodckdown. Labour Party leader Sir Kier Starmer openly called for such a measure and there were fresh rumours that the government would engage in another U-turn. Sterling then dipped to near 1.2950 against the US currency and to 1.1010 against the Euro. Sterling remains fragile on Wednesday amid further reservations over trade and coronavirus developments.
The US NFB small-business confidence index strengthened to 104.0 for September from 100.2 previously and above consensus forecasts. Most indicators strengthened on the month with firm capital spending, although uncertainty also increased.
US consumer prices increased 0.2% for September following a 0.4% increase previously and in line with consensus forecasts with the year-on-year rate at 1.4% from 1.3%. The core increase also met market expectations at 0.2% with the annual rate fractionally below market expectations and unchanged at 1.7%. There were no significant implications for monetary policy with the Fed not considering any changes in interest rates.
San Francisco Fed President Daly stated that monetary policy will remain very supportive and also noted that the Fed will not trade millions of jobs to avoid lifting stocks.
The German ZEW economic sentiment index declined to 56.1 for October from 77.4 the previous month and below consensus forecasts of 73.0. There was a slight improvement in the current conditions index to -59.5 from -66.2 previously. There was a monthly decline in the Euro-zone index and the data overall maintained concerns that the recovery overall would stall amid a renewed increase in coronavirus cases.
The Euro’s reversal from the 1.1835 top reached last week has accelerated with a surge in Dollar strength across the board. Reports about Johnson & Johnson pausing their COVID-19 study have dampened hopes of a coronavirus vaccine, weighing on investors' mood.
Furthermore, with the German ZEW index showing a larger than expected decline added to negative pressure on the common currency.
As of writing, the Euro trades around the 1.1735 mark against its US counterpart.
Data To Watch
09:00 - EUR - ECB President Lagarde Speaks
13:30 - USD - Core PPI
13:30 - USD - PPI
Posted in Daily Market News on Oct 14 2020