Morning Update – 21/10/16 – by Arjun Lakhanpal

Morning all.. Wall St closed down marginally in a quiet session for stocks but all the action was in FX and bonds.. Stocks pressured by falling oil.. In Asia we saw the Nikkei close down just under 0.5% as USDJPY drifted lower into the close. EUR remained weak after a torrid session after the Draghi comments and we have made a low just below 1.0900.. Draghi did assure us that an eventual exit from QE is “unlikely” to come abruptly and does suggest that asset purchases – currently intended to run at EUR80bn until the end of March – will continue well beyond the first quarter of next year, even if possibly at a reduced pace. This seems to have cleared the way for EUR downside now and we have brroken a few big levels in EUR. USDCAD has been bid on weak oil but also Belgium voting against the EU/Canada trade deal. USDJPY was pressured by comments from a Former BoJ official.. Former Bank of Japan board member Sayuri Shirai says new framework is implicit tapering. Speaking in Tokyo, she says buying govt bonds at annual pace of 80 trillion yen isn’t sustainable.. She says new framework signals abandonment of further increase in quantity. USD mostly stronger versus G10 FX overnight for the second consecutive session. EUR particularly underperformed as it hit levels not seen since March; 1.0908 last. Ahead of Nov 1st BOJ meeting, Gov Kuroda reiterated he would consider what is appropriate for the yield curve target at every decision, but also added he sees no immediate need for change of view consider there have not been any big changes seen in the economy, price and financial developments. This morning we get UK government borrowing data and little else.. All eye on the EUR to see if it extends losses.. Good luck..