The pound is mixed this morning, dropping against the euro, but gaining against the broadly weaker dollar on speculation Federal Reserve will consider additional easing measures in order to boost economic recovery. Sterling strengthened on Friday after report showed that UK budget deficit narrowed in September more than economist forecast, setting the country’s net borrowing (excluding support for banks) to 14.1 billion pounds from 15.4 billion a year earlier. There are no economic releases or policy speeches scheduled for today. Looking to the week ahead, BBA (British Banker’s Association) lending data for September and current account data for Q2 are scheduled for Tuesday, with the expectations for current account figures to improve slightly. Also, Bank of England Governor Mervyn King will attend parliament to answer questions from members of the Treasury Committee on the subject of quantitative easing. On Wednesday and Thursday CBI (Confederation of British Industry) publishes its industrial trends and distributive sales figures for October. Finally, we receive Gfk consumer index for October on Friday, with projections for figures to remain unchanged at –30 from previous month.
The euro gained against its major rivals during the overnight trade after French Finance Minister Francois Barion said he is “convinced” leaders will find solution on region’s debt crisis by Wednesday. The EU leaders excluded a forced restructuring of a Greek debt, but remained firm on previous plan of enticing bondholders to write down 40% of their Greek debt in order to help restore country’s finances. The idea was pushed by Germany, defeating French efforts to boost the rescue fund (EFSF) by enabling it to borrow limitless sum from the independent central bank. On the economic docket scheduled for today, French and German PMI data is due out this morning, with expectations for the manufacturing and services figures to have deteriorated further in October.
The dollar dropped across the board during the Asian session as global shares gained after a report showed China’s manufacturing may expand in October, sapping demand for so called safe-haven assets. Greenback’s sentiment was dented on speculation the Federal Reserve will consider additional quantitative easing in order to bolster the economy. Fed Vice Chairman Janet Yellen said on Friday that a third round of purchases might became warranted, given the bleak economic outlook. Looking to the weak ahead, third quarter GDP figures headline the economic calendar, with the expectations for the world’s largest economy to expand 2.5% in three months through September.
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