Market focus is on the chancellor’s medium term fiscal plans due on October 31st as the government attempts to restore its credibility. The Office for Budget Responsibility’s independent assessment will be critical.

The Bank of England’s emergency support operation finishes today and worked well in calming markets. The Bank is fully expected to raise interest rates by 1% on November 3rd and take Bank rate to 5.50% by mid-2023.

The economy unexpectedly shrank by 0.3% in August and the risks of a recession continue to grow with much higher interest rates still to come. The jobs market remains resilient, with wages increasing by 6% and the unemployment rate down to an historically low of 3.5%. The latest inflation data is due next week, with the headline rate expected to be 9.9%, showing the stark squeeze on disposable incomes continues, despite expectations we are nearing the peak.

In the US, inflation has dropped to 8.2% but despite hopes we may have seen the peak, the Fed will continue raising rates in the months ahead with a 0.75% hike fully priced in for November 2nd, and rates expected to peak around 4.80% mid-2023.

In Europe the central bank is forecast to raise rates by a further 0.75% at the end of the month despite the ongoing concerns over gas supplies during the winter months and the growing risks of recession.