EUROPEAN PARLIAMENT: EPP Breaks Cordon Sainitare In Green Rules Vote w/Far-Right

• MNI: POWELL-FED MAY BE APPROACHING END TO QT 'IN COMING MONTHS'
• POWELL-SOME SIGNS HAVE BEGUN TO EMERGE LIQUIDITY IS TIGHTENING
• LONGTERM BALANCE SHEET TRANSITION WILL BE GRADUAL, PREDICTABLE
• AMPLE RESERVES REGIME HAS PROVEN REMARKABLY EFFECTIVE-POWELL
• ECONOMIC OUTLOOK HAS NOT CHANGED MUCH SINCE SEPT FOMC-POWELL
• DOWNSIDE RISKS TO EMPLOYMENT APPEAR TO HAVE RISEN-POWELL
• GROWTH IN ECONOMIC ACTIVITY MAY BE FIRMER THAN EXPECTED-POWELL
• MONETARY POLICY IS NOT ON A PRE-DETERMINED PATH-POWELL

• EUR/USD: Oct16 $1.1500-20(E1.5bln), $1.1580-00(E3.9bln), $1.1700-05(E1.1bln); Oct17 $1.1510-15(E1.9bln), $1.1670-80(E1.2bln); Oct20 $1.1515(E1.0bln), $1.1545-50(E1.0bln)
• USD/JPY: Oct20 Y154.80($2.0bln)

For full document click here.

• All in all a disappointing UK labour market report - likely increasing the probability that Governor Bailey wants to keep optionality for voting for a Q4 cut and hence eliciting a negative GBP FX reaction and seeing SONIA futures move to price in around a 35% probability of a Q4 cut (up from around 23% as of yesterday’s close).
• The key surprise for us is the soft private regular AWE data as we note that Governor Bailey cited in explaining his decision to vote for an August cut the softer-than-forecast data on this front in Q2 (which undershot the BOE’s forecast by 0.4ppt).
• Assuming the Y/Y single month rate for September remains in line with that seen in today’s August print and no further revisions, we are on track to undershoot by 0.3ppt in Q3 (a forecast that had already been downgraded in the August MPR).
• Aside from the poor private sector wage numbers: the unemployment rate was higher than expected (and higher than the BOE’s Q3 forecast), there was a smaller 3-month LFS employment growth number than consensus expected and vacancies fall.
• The brighter points were that public sector bonuses were higher than expected (bringing up the total whole economy pay number) while there were some upward revisions to payroll growth so the 3-month fall in payrolls is only 0.2k (from a 38k fall to the 3-months of Aug that was revised to -12.6k).