There had been hopes of some calm descending on European markets following Germany's general election last month, but the result there - along with the Catalonian independence row in Spain and rumours of a political heave in Britain - appear to have made that wishful thinking.

"Post the French and Dutch general elections in the early part of this year we've had a period of political calmness in Europe, underpinned by GDP growing at its fastest pace since 2011 and economic sentiment at a ten year high," said Garret Grogan, global head of trading at Bank of Ireland Global Markets. 

"Political issues are raising their head in Germany and more recently in Spain and Catalonia, but the market is taking this in its stride. We feel that the next bout of political uncertainty in Europe will probably come from Italy in the first quarter of next year." 


Before then though the European Central Bank holds an important meeting where the authority is expected to outline plans for the future of its bond buying programme. That will have a big influence on euro - which has been in a relatively strong position in recent weeks. "On October 26th we've an ECB meeting and they have indicated that they will be communicating the path of the unconventional monetary policy that they've been employing," he said. 

"The market is expecting the bond buying programme to fall from €60 billion per month to €40 billion per month for six months. This has probably been one of the key drivers for the euro over the past few months so markets will be watching this very keenly," the trader said.

A somewhat clearer picture has emerged of what is to come from the US Federal Reserve, with traders anticipating a further rise in the interest rate before the year is out. The Fed has also clearly indicated that it plans to shrink its balance sheet, as it seeks to begin the long process of unwinding its own crisis-era stimulus measures. Where the uncertainty lies with the Fed, however, is around the person that will lead it into 2018, as a decision will soon be made on the bank's chair person. 

Outgoing chair Janet Yellen is in the running to remain, but three other names are also seen as potential replacements. They are Fed Governor, Jerome H Powell; one of President Donald Trump's economic advisors, Gary Cohn; and former Fed Governor Kevin Warsh. 

"The big story in the US this year has been the weakening dollar, which is surprising given the economic performance and a economy at full employment," said Mr Grogan. "What's probably driven that is the lack of follow-through on the so-called Trump Trade or fiscal stimulus. What's interesting is, similar to Q4 last year, this story is coming back onto the table so the dollar may take a pause here."

In Britain, meanwhile, there is as close to a dead cert about its central bank's next move, with the Bank of England saying a rate rise will come in the near future if the current economic situation persists. This is usually the kind of news that will boost a currency and it did briefly, before sterling began to slide again against both the euro and the dollar. 

Mr Grogan said this is a reflection of the political uncertainty that persists around prime minister Teresa May and the Conservative government there, as well as their strategy in regards to Brexit. "The pound bounced from its recent lows and rallied by 6% driven mainly by two things; one, the expectation that we would see some political stability, while there was expectation that Teresa May's speech in Florence would give us some clear guidance and two; which was the Bank of England," he said. "But since then we have seen some disappointment, the pound is on the back foot again, political uncertainty has raised its head with no real details in the Florence speech, negative coverage of Teresa May's speech at the Tory conference and economic data is softening," he added.

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MORNING BRIEFS - Consumer sentiment rose in September, according to a survey from KBC Bank and the ESRI, reaching its highest level in a year and a half. The index suggests that people have become less nervous about the impact of Brexit, though there remains concerns around the global economic picture. Households also said they felt more confident about their finances, despite wage growth remaining modest at present.

*** Storm Technology is to create 60 new jobs at its offices in Dublin and Galway. The company offers consultancy services around Microsoft products and said the expansion was due to growing demand from companies looking to conduct more of their operations digitally.

*** One of Spain's main banks, Sabadell, is to move its legal base from Catalonia to Alicante. The decision was made by the bank's board in light of the political uncertainty around Catalonia's push for independence from the rest of Spain and will ensure Sabadell has continued access to Spanish and European funds. Spain's third biggest lender, Caixabank is said to be considering a similar move.

*** A record number of summer passengers has put EasyJet on course to reach the upper end of its profit forecast this year, the British budget airline has said. EasyJet said it expected headline profit before tax of £405-410m for the year to the end of September.  It had given a range of £380-420m in July.