Morning Update – 07/10/16 – by Arjun Lakhanpal

October 7, 2016 by

Morning all.. Wall St closed more or less unchanged which was a solid performance given the rise in US yields and the dollar but all the action was in Asia where GBP collapsed; literally. GBP/USD fell from the 1.2615 close in NY to trade in a few minutes down to 1.1500 and then bounced to 1.2450. This flash crash has had a deep impact on many but so far this move seems contained to GBP alone as the Nikkei closed down just 0.25%. Theories of what drove the move range from; comments the president of France made at dinner on a hard brexit, to the illiquidity in Asia hours (+ China holiday), to stop loss. In terms of risk sentiment itโ€™s interesting how little traditional risk assets have responded โ€“ JPY strengthened only marginally overnight and Gold remained firmly offered below the 200dma. In China, reserve outflows accelerated falling for the 3rd straight month, whilst there was no fix because of the holiday. In Japan cash earnings were lower, and there were pleas from Abeโ€™s economic advisor Honda for an increase in fiscal stimulus and expanded monetary easing. Looking ahead today we have NFP โ€“ given the bid that the USD had yesterday this is going to be a closely watched number, the unemployment rate is likely to decline to 4.8%, while average hourly earnings likely rose 0.3% in August and 2.7% over the past year. This morning we have French, Spanish and UK Industrial Production and UK Trade balance.. Good luck.