Sterling briefly made forays back into the 1.10s against the euro before fears over the recovery in the US jobs market sent risky assets sharply lower.

US ADP unemployment, which is a crucial indicator for Friday’s Non-Farm payrolls release, was released at -264k, 64k worse than expected and signaling that the tumult in the jobs market is not yet over.

This was not the case in Germany however as unemployment fell by 12,000 jobs in September prompted by a government-sponsored short-time working subsidy scheme. This brings the total unemployment rate in Germany to 8.2% lower than the average in the EU of 9.7%.

It is not all good news for the EU however as inflation fell by more than expected. The ‘flash’ figure is only an estimate but shows that prices fell by 0.3% on a year on year basis. This of course will hold the ECB from cutting rates sooner rather than later as they allow the recovery some room to breathe before tightening monetary policy.

The most volatile movement however was reserved for the Swiss Franc yesterday as it fell on speculation that once again the SNB had intervened in the market to sell CHF and try and bring deflationary pressures under control. Gossip has it that Swiss banks have been selling large chunks of Swissie over the past few days and that they have been acting as agents for their central bank.

It is a really busy data day which indicates volatility on all crosses. We have PMI and ISM manufacturing from the UK, Europe and US today alongside German Retail Sales and US inflation. I think a continuance of trend is probable i.e. a falls for pound and a brawl between EUR and USD.

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