Friday's non-farm payroll report was heavily affected by the US hurricane season - shedding a net 33k jobs. This was a significant undershoot of the +74k consensus, whilst our own forecast was for a weaker 0k print. The unemployment rate however undershot consensus expectations with a 4.2% reading, while consensus and our own forecast had been for 4.4%. The Labour Department remarked that the hurricanes had ‘no discernible effect’ on September’s unemployment rate (i.e. just on the payrolls). The unemployment rate is now further beyond the bottom end of the Fed’s view of the longer-term unemployment rate (4.5%-4.8%) giving markets a reason to read today’s figures hawkishly. Another hawkish read came from pay growth figures, which climbed to 2.9% y/y in September with August’s reading revised up from 2.5% to 2.7%. The 2.9% September print is the highest reading since December 2016. We caution that the September pay growth figures are also likely hurricane affected; when large chunks of the part-time and weekly paid, typically lower paid workforce, temporarily drop out of the sample, measured earnings growth rises. However the upgrade to the August reading does put pay growth numbers on a firmer standing pre-Hurricane season. Note that the Fed will do its very best to ignore hurricane related noise in the numbers so the unemployment rate is probably the most meaningful piece of information in Friday’s release; the step-down in this rate will be seen further raising the chance of a December rate hike.

After last week's vote for Catalonian independence, PM Rajoy continues to hold a hard line on Catalonia's options. In an interview with El País on Saturday, Spain's PM said the 'government will ensure that any declaration of independence will lead to nothing'. Catalan leader Puigdemont is expected to address the regional parliament on Tuesday at 18:00 local time (17.00 BST). Spain's Constitutional Court suspended a Catalan parliament session that had been planned for Monday, last week. After last week's speculation that independence would be declared unilaterally at the parliament's next sitting, it now appears that the current plan will stop short of this. Indeed some in the Catalan government are pushing Mr Puigdemont to delay a declaration and return to talks or call new regional elections. Others suggest he should press for a symbolic statement or independence 'lite' i.e. announcing independence for some point in the future. However even this will likely rile the Spanish government further. Mr Rajoy has said he would not accept negotiations under an 'independence lite' scenario. We now await news as to whether Mr Rajoy will take any further steps to try and slow independence momentum ahead of Tuesday's regional parliament session. Indeed, when asked whether he was prepared to invoke Article 155 of Spain's constitution, which allows the national parliament to intervene in the running of an autonomous region, Mr Rajoy said 'I don't rule out absolutely anything that is within the law'.

The day ahead

Today is a national holiday in the US so we can expect things to be a little lighter on the data front. Markets will likely be looking to the UK Government as it resumes its Brexit negotiations today, while Theresa May will be hoping that her party can put the disaster of last week’s Tory party conference behind her.

Thought of the day

England capped a successful World Cup qualifying campaign with what has been described as a 'pedestrian' 1-0 victory over Lithuania. Whilst the purists will argue that Gareth Southgate's team has failed to get the pulses racing in recent matches, there are no points awarded for style, only results. As a long suffering Arsenal fan, I should know! The world of FX risk management can be as dull or sexy as you choose it to be and there's a host of products, all effective in their own right, to match your tastes. So if you'd like a no nonsense approach or would like to explore alternatives that offer outperformance, give your Investec dealer a call today.