Morning Update – 08/02/2017 – by Arjun Lakhanpal

Morning all.. A quiet finish on Wall St but S&P did touch a new record high at one point but closed unchanged on the day; again all the action in bonds and FX markets. In Asia we saw the Nikkei close up 0.5% as USDJPY managed to rally back above 112.00 and failed to close below 111.95 which some see as an important hold for the dollar. US yields have also nudged back to 2.4% which is helping the dollar. BoJ Policy Board Minutes (Jan 30-31): CPI likely to rise as output gap tightens but will take time to accelerate; very unlikely inflation expectations will pick up significantly; BoJ should be careful about changing monetary policy quickly; concerns about BoJ’s ability to control yield curve could grow; daily market operations have no implications for future policy stance; Japan economy has strengthened since H2 ’16 but uncertainties will persist for some time; note downside risks in short term. Japan Chief Cab Spox: closely monitoring FX, commodity price and yield movements as they affect Japanese C/A balance; wants Trump to understand Japan’s trade issues and recognize contributions to US economy during meeting next week..Iran Oil Minister: All OPEC members agree oil should be at $60/bbl. Oil actually lower with WTI down 0.8%. US 10yr yields at 2.395%; rather quiet..This morning we get French business sentiment and Spanish Industrial output. No US data of note later. good luck..