US averts debt ceiling default

They left it to the last possible moment but overnight US Senators reached an agreement on a bi-partisan proposal to end the first US government shut-down for 17 years and temporarily suspend the country's debt ceiling with House Republicans indicating that they will not oppose its passage in the lower chamber. The US government will now be funded until 15 January 2014 and the debt ceiling limit will be suspended until 7 February.

Under the terms of the agreement, the US Treasury Department will be allowed to use ‘extraordinary measures’ to delay default for about another month beyond the 7 February. An immediate spike in risk appetite saw the overnight Far East Asian markets soar and boosted the high yielding currencies like the Australian and New Zealand dollars.

In the UK, the Office Of National Statistics (ONS) reported that the UK labour market continues to improve with the unemployment rate for the June-August period remained unchanged at 7.7%. More importantly, the number of people making jobless claims fell the most in 16 years. After the better than expected UK inflation data out on Tuesday, the pound was boosted by the data released and is retracing some of last week’s losses, particularly against the euro.

In the euro zone, European Union (EU) statistical office Eurostat reported that euro zone inflation remains well below the European Central Bank's (ECB) target level with the September consumer price index (CPI) hitting its lowest level since February 2010.

Of interest, on a country-by–country basis, Greece continues to experience deflation while Portugal and Spain registered only a small increase of 0.3% and 0.5% respectively whilst the three largest euro zone economies Germany, France and Italy showed inflation of 1.6%, 1.0% and 0.9% respectively.