Sterling in High Spirits

The British economy continues to show promise, as data just released has shown that the number of claimants for jobless benefits continued to slide for August. Against the backdrop of a recovering domestic economy, the BoE Governor Mark Carney’s testimony to the Treasury Committee tomorrow will hold significance in gauging the BoE’s stance going forward. Across the Atlantic, the threat of US-led military action against Syria receded after the US President sought to pursue a diplomatic solution to the problem and asked Congress to defer a vote authorising the use of military strikes against Syria. With little left on the global economic map today, ongoing events in Syria are expected to grab most of the limelight in today’s trading session.

Pound Sterling – UK Markets

The Pound managed to sustain its upward momentum against the US Dollar yesterday after the US accepted the Russian proposal to place Syria’s chemical weapons under international control, which Syria agreed to. The softened stance of the US reduced the odds of an immediate military strike against Syria and increased the demand for high yield currencies. At home, the labour market report just out has sprung a positive surprise and has revealed a more than expected decline in the number of people claiming jobless benefits for August. The unemployment rate also moved lower to 7.7%, pushing the Pound sharply higher against the majors in today’s trading session. The unexpected easing in the unemployment rate has helped in bringing forward market expectations of an interest rate hike. Later today, a speech by the BoE policymaker David Miles, a prominent dove, will be closely followed, especially in the aftermath of a visible change in stance of another policymaker, Paul Fisher, over the weekend. Meanwhile, further updates on the Middle East crisis will have a bearing on investors’ risk appetite in today’s session.

US Dollar – US Markets

The US President’s acceptance of the Russian proposal to place Syria’s chemical weapons under international control has managed to pacify fears of geopolitical tensions escalating in Syria. Receding fears of military strikes in Syria limited the upside of the US Dollar against its major peers yesterday. Meanwhile, the greenback has moved sharply lower against the Pound in today’s trading session following upbeat jobs data in the UK. Traders have now turned their attention towards other critical events, such as the FOMC meeting scheduled next week. In the midst of growing clamour over a possible unwinding of the current stimulus measures, market participants expect some hints from the New York Fed President, William C. Dudley’s speech scheduled tomorrow. With little on the global economic calendar today, market participants are looking ahead to the weekly initial jobless claims data due tomorrow, especially in light of the disappointing non-farm payrolls report released last week, for help in gauging the latest labour market conditions in the US.

Euro – European Markets

The Euro limited its downside risks against the US Dollar in yesterday’s trading session amid easing concerns of a US-led military strike against Syria, following Barack Obama’s desire to seek a diplomatic solution on the matter. With the US stepping down from its earlier aggressive stance, the demand for riskier asset classes remained supported yesterday. Moreover, upbeat Chinese economic data added to the largely positive environment in markets. In today’s trading session, the single currency is searching for direction against the US Dollar. The final reading of the German consumer price inflation released earlier today came in line with market expectations and failed to inspire any confidence among traders. With the Euro zone unable to provide any clear direction with regards to its economic recovery, the ECB President Mario Draghi’s speech and the ECB’s monthly report, due tomorrow, are expected to provide further insights into the central bank’s stance on the prevalent economic situation in the region. Furthermore, the Euro zone industrial production data due tomorrow is expected to attract market attention.

Other Currencies – Highlights

The New Zealand Dollar moved higher against the greenback yesterday, as tension surrounding an impending US military strike against Syria eased after the US opted to seek a diplomatic solution on the issue. Market sentiment was further boosted by upbeat Chinese economic data, which showed that the world’s second largest economy was finally emerging from its recent economic slowdown. However, the Kiwi Dollar has failed to continue yesterday’s upward momentum this morning ahead of the Reserve Bank of New Zealand's policy meeting scheduled tomorrow. Market participants are expecting the central bank to maintain status quo on current low interest rates, to support recent signs of economic recovery. Apart from global economic news flows, the domestic manufacturing PMI and business confidence data scheduled later will be eyed for further direction to risk appetite.