Morning Update – 17/10/16 – by Arjun Lakhanpal

October 17, 2016 by

Morning all..  Wall St finally closed marginally higher on Friday after a choppy session as parts of the Retail sales data disappointed. Oil was also sliding into the close and helped undermine earlier gains in equities. Asia had a soft session but the Nikkei managed to rally into the close and finished up 0.3%. The Dollar reacted to a steep rise in US yields Friday night after comments from Yellen suggesting she will allow the economy to “run hot”. This took the dollar higher and saw some significant chart breaks in FX. The EUR broke and closed below 1.1000 and traded down to 1.0964 in Asia and USDJPY held resolutely above 104.00 but USDCAD had a poor close and so too did GBP/USD which remains weak this morning as we wait for a High Court ruling on a need to see a parliamentary vote on Brexit. In Europe, Professor Otmar Issing, the ECB’s 1st Chief economist, said the ECB is becoming dangerously over-extended and cannot reconcile its conflicting roles as banking regulator, Troika enforcer & agent of monetary policy. According to Issing, one day the house of cards will collapse as the whole euro project is unworkable in its current form. ECB the main risk event this week. Most expect the ECB to stay put at the October meeting. More specifically, many expect policy rates to be kept unchanged with no changes to be made to the asset purchase programme (APP); we continue to expect the ECB to extend the APP beyond March 2017 at, at least initially, the current volume of €80bn. NZD the biggest mover and outperformer, up ~30bps, despite weak tier 2 domestic data release. GBP drifted lower overnight, down ~25bps, ahead of a relatively data-heavy week for the UK. Tomorrow we get inflation data for September, we expect headline consumer price inflation of +0.9%yoy, up from +0.6%yoy in August; key to the UK inflation outlook will be the extent to which recent Sterling weakness begins to feed through into consumer prices. This morning we look for EU CPI data but little else.. Good luck..