US treasury yields jumped sharply overnight on talks that ECB would taper its EUR 80b bond buying program ahead of the planned conclusion in March 2017. 10 year yield surged 0.061 to close at 1.683, comparing to last week's low at 1.543. The development also lifted the greenback with dollar index hitting at high as 96.44, breaching a near term resistance at 96.33. It's reported ECB policymakers are still undecided on whether the quantitative easing program will end as planned. The decision will depend on incoming data and economic outlook. But once the decision is made, ECB will likely starting lowering the size of the asset purchase program in steps of EUR 10b a month. Meanwhile, it's also noted that even if the asset purchase program finishes, the central bank's balance won't shrink any time soon and the stimulus effect will remain in place for a while.
Comments from Fed officials also provide some support to Dollar. Chicago Fed president Charles Evans said that "I have a forecast where things continue to improve. I do think there will be a rate increase." He would also be "fine" with a decision to hike in December and he didn't rule out doing so even in November. Nonetheless, he also noted that "I am less concerned about the timing of the next increase than I am about the path over the next three years". Richmond Fed president Jeffrey Lacker said that "while inflation pressures may seem a distant and theoretical concern right now, prudent preemptive action can help us avoid the hard-to-predict emergence of a situation that requires more drastic action after the fact."
Elsewhere, Sterling remains the weakest major currency this week on Brexit concerns. Earlier in the week, British Prime Minister Theresa May indicated, as she spoke at the Conservative Party conference in Birmingham, that she would trigger Article 50, the clause needed to start the Brexit negotiation process, in 1Q17. The news inevitably has shocked investors as many, indeed, have hoped the process would be delayed or even "avoided". May's comments signaled that a "hard" Brexit appears likely, though she stressed that she would fight for terms that are beneficial to the country. More in Brexit is for Real!
On the data front, Australia retail sales rose 0.4% mom in August versus expectation of 0.2%. UK BRC shop price index dropped -1.8% yoy in September. Services data will be the main focus today. UK will release services PMI while Eurozone will release services PMI final and retail sales in European session. US will release ADP employment change, trade balance, factory orders and ISM services. Canada will release trade balance.