Summary:

• The US dollar gives up some of its gains from the last two weeks, investors await ADP and non-manufacturing ISM reports
• Spanish stock stay under pressure of rising tensions in Catalonia
• Better services PMI from the UK props up the pound

The US dollar has weakened for the second consecutive day. Investors reacted negatively to the report saying that Jerome Powell is on the shortlist to lead the Fed. Kevin Warsh and Gary Cohn are also being under consideration. Moreover, the Spanish IBEX (SPA35 in xStation5) plunged as Catalonia still opts for independence. This morning we got UK services PMI which beat the expectations. Hence, GBP moved a bit higher.

Bloomberg revealed that there are 3 names on the short list for Janet Yellen’s post in Fed: Kevin Warsh, economic adviser Gary Cohn and a current FOMC member Jerome Powell. Cohn seems to be the least likely choice after a rift with president that occurred after an infamous Trump’s Charlotte speech. Meanwhile Powell is considered to be a dove at the Fed so a choice between himself and Warsh could be of far reaching consequences for the markets like Tnotes, Gold and all US dollar pairs. Anyway we can expect rumours to swirl and enrich the US dollar trading that could be more lively anyway given a streak of data that will be released in following days (with ADP and non-manufacturing ISM out today).

One needs to take note of the Spanish stock exchange (SPA35) which plunged over 2% following an announcement from the region’s secessionist leader Carles Puigdemont. He proclaimed that Catalonia would declare independence in a matter of days. When asked by the BBC what Puigdemont would do if the Spanish government were to intervene and take control of Catalonia’s government, he said it would be “an error which changes everything”. On the other hand, Spain’s economy minister ensured that business has nothing to fear from a Catalan crisis. On the other hand, German DAX (DE30) stayed slightly above the reference level.

Soft indicators from the UK economy have been hard to analyze of late. While manufacturing and construction slowed down in the past month, services activity unexpectedly improved in September. All of that makes the data blurry with no an unequivocal signal for the Bank of England. However, a mix of better print and weaker dollar help GBPUSD recover somewhat. As of time of writing the pair is increasing 0.3%.

Wednesday afternoon could bring some clues with regard to Friday’s jobs report as both ADP and non-manufacturing ISM are put into the calendar. On top of that, we will have speeches from two the most prominent central bankers in the world which might lift volatility in the FX market this afternoon. Moreover, we will know a weekly report from the US DoE on a change in crude oil inventories.