Scottish Vote Uncertainty Continues

Sterling investors are expected to remain on tenterhooks in the upcoming trading session as anxiety over the Scottish referendum were heightened after an overnight poll survey showed that the ‘No’ campaign is leading the board. Separately, the BoE Governor reiterated his earlier week’s comments, in his testimony before the Treasury Select Committee yesterday, that the central bank has drawn up contingency plans to handle a ‘Yes’ vote in Scotland next week. In the Euro zone, markets will keep a close watch on the ECB President, Mario Draghi’s speech later in the day for further clarity about the measures already announced last week. With inflation in China slowing at a faster than expected pace for August, expectations that the nation might resort to additional stimulus measures to boost its economy will only strengthen further.

Pound Sterling – UK Markets

The BoE Governor while testifying before the Treasury Select Committee yesterday reiterated that the central bank might hike its key interest rate next spring if the domestic labour market continues to show signs of improvement. However, Mark Carney assured the MPs that the central bank had drawn up contingency plans to handle a Yes vote in Scotland next week, although the BoE Governor declined to divulge any further details about the same. Meanwhile, the MPC member, David Miles, stated that he expects more slack in the nation’s labour market than many of his other colleagues and sees less immediate need for a rise in interest rates. Markets will continue to scrutinise updates related to Scottish referendum, especially after a separate poll survey released overnight indicated a preference against independence amongst voters in Scotland. The Pound is trading in a tight range against the majors this morning. In absence of major economic data in the UK, investors will keep a close watch on a slew of macro data in the US considering their potential to alter risk sentiment in the upcoming trading session.

US Dollar – US Markets

With the last week non-farm payrolls report showing an unexpected decline for August, today’s initial jobless claims data will keep market participants interested in order to ascertain whether the blip was a temporary phenomenon or whether there still persist significant amount of slack in the nation’s labour market. With no other important domestic economic release today, domestic retail sales and the Reuters/Michigan consumer confidence report scheduled tomorrow will help market participants gauge the status of domestic confidence among consumers. With inflation playing a crucial role in the Fed’s forward guidance for deciding on the timing of an interest rate hike, traders will keep a close watch on next week’s central bank policy meeting. The greenback is trading in a tight range against the majors this morning. Comments from the ECB President, Mario Draghi, later today are expected to keep investors in the Euro-US Dollar pair on their toes. Meanwhile, China has reported a more than expected drop in its inflation rate for August, strengthening investors’ expectation that growth in world’s second largest economy remains weak.

Euro – European Markets

Data just out revealed that the final consumer price inflation readings across Germany and France were in line with the preliminary estimate for August. However, with a receding trend in inflation in the key European nations, despite the ECB introducing new stimulus measures earlier this year, today’s speech from the central bank President, Mario Draghi, will be eyed for details around the recently announced stimulus measures. Although comments from the ECB Chief are not likely to offer any surprises, but more information regarding the expected duration of these easing measures might help markets gauge the intensity of the deflationary threat hovering over the Euro zone. Additionally, the latest ECB monthly report reiterated that geopolitical tensions in Eastern Europe continued to weigh on the region’s economic growth. The Euro traded lower against the majors yesterday. A statement from the Ukrainian President indicated that Russia had withdrawn a major portion of its troops stoking hopes about a lasting truce agreement between the two nations.

Other Currencies – Highlights

The Aussie Dollar-US Dollar rose initially in today’s early morning session and touched the 0.92 mark amid surprisingly upbeat labour market data in Australia for August. Report showed a more than anticipated decline in the unemployment rate, with the participation rate in the nation surprisingly improving for August. However, investors remained cautious about the jobs data as a rise in the number of job additions were mainly due to an improvement in part time employment. Separately, the Melbourne Institute’s August report upgraded the 12-month inflation outlook in Australia, another sign of improving domestic demand after consumer morale improved sharply last month. However, the Aussie Dollar pared its early session gains against the greenback after China reported a more than expected drop in its consumer price inflation for August. With the crucial US Reuters/Michigan consumer confidence and retail sales surveys tomorrow accompanied by significantly important Chinese economic releases over the weekend, the Australian Dollar is expected to witness some volatility against its major peers.