Morning Update – 10/04/2017 – by Arjun Lakhanpal

Morning all.. Wall St was as confused as everyone else Friday after poor US data but comments form Dudley on balance sheet reduction again and closed marginally lower. Asia fared rather better, helped by the rally on Friday in USDJPY and the Nikkei closed up 0.78% but fears over the Syrian air strike and the repercussions need to be monitored as could be a risk off event. Russia and Iran are far from happy about the strike. Russian press has reported that communications in Syria have been disrupted after the US actions, while other reports noted new bombing on the rebel town that suffered the chemical attack. ISIS also waged an attack on a joint coalition forces base in the south of the country. Separately, US reports noted that a strike force led by US destroyer is approaching the Korean peninsula. State Sec Tillerson however said that a regime change is not the objective for North Korea. Broad USD strength for the start of this week mostly derived from the momentum on Friday as comments from Fed’s typically more dovish voter Dudley are perceived to be increasingly more hawkish. Fed’s Bullard also spoke in Australia, noting the under-whelming jobs report is in line with the view of 2% inflation and modest growth, urging a wait and see for Trump’s fiscal policy combined with just one more rate hike by the Fed this year. Nikkei was the best equity performer – up ~70bps – as USD/JPY hit a 1-week high above 111.50. In other FX majors, AUD/USD slid to January lows below 0.7480 and NZD/USD was at a 3-week low around 0.6920. In notable economic data, Australia home loans saw their biggest m/m decline in 4 months, though most analysts are focusing on this week’s employment data as a key driver for RBA bias going forward. Japan’s trade surplus released better than expected. This morning we get very little; Bank of France business sentiment and Italian Industrial Production. Good luck.