Morning Update – 18/10/16 – by Arjun Lakhanpal

Morning all.. Wall St closed down 0.3% in a quiet session that lacked momentum. In fact all assets had a quiet day yesterday as markets seemed to take a breather as Yields failed to do much. The Nikkei found some support and closed up 0.34% but again a rather quiet session but helped by a slightly weaker USD. USD mostly weaker versus G10 FX overnight amongst broader risk rally. Antipodean currencies the main out-performers with NZD up ~65bps after NZ Q3 CPI released at 0.2% on both a q/q and y/y basis, above market estimates. Annual inflation saw tradable prices fall over 2%, though housing inflation was up over 6%. Annualized CPI has now been below 1-3% target range for 2 years, but the slight beat reduced market implied probability of another RBNZ rate cut in Nov by about 5pts to just under 80%. AUD followed closely behind – up half a percent – after RBA’s Governor Lowe spoke at an investment conference, reiterating RBA is monitoring employment and financial stability for impact from prior rates. Also, he hinted next week’s quarterly CPI will be closely watched for progress on returning to 2-3% target. RBA’s October minutes offered little in forward looking details and maintained the RBA’s relatively upbeat assessment. Federal Reserve Vice Chairman Stanley Fischer sees limits to how far the U.S. central bank can pursue a strategy to push unemployment ever lower, an approach characterized as seeking a high-pressure economy by his boss, Janet Yellen, in a speech last week. Markets still pricing about a 70%+ chance of a hike in December. This morning and indeed today is all about inflation data. We have CPI from UK, and the US and both will be closely monitored by investors and central banks alike. Good luck..