Morning Update – 05/01/2017 – by Arjun Lakhanpal

Morning all.. Another decent close on Wall St with S&P up another 0.57% but Asia had a tougher night as the USD got hit, US yields fell and the Nikkei fell 0.37%. but it was the move in the dollar that caught the eye even with better data from China and Japan. China Dec Caixin Services PMI rises: 53.4 vs 53.1 prev, highest 17 mths and Japan Dec Services PMI beats: 52.3 vs 51.8 prev; highest in 11 mths. Japan PM Abe (NY address): asks major business leaders to hike wages in 2017 at least in line with last year; can only escape deflation if wage hikes do not fall behind price increases.. USDJPY closed near the days lows in NY and was sold off aggressively in Tokyo and again into the close, breaking below 116.00 with some ease. The low so far has been 115.58. The dollar also fell across the board with EUR hitting 1.0575 but GBP lagging which took EURGBP higher. Oil is unchanged but US yields fell, weighing on the dollar and sit at 2.41% now. This Dollar sell off is interesting as December Minutes from the Fed saw almost all members seeing upside risk to growth forecasts on expectations fiscal policy will be more expansionary under Trump administration; around half of members assumed greater fiscal stimulus in forecasts; many members saw increased chance of faster rate hike pace due to a higher risk of sizable undershooting of long-run normal unemployment rate leading to increased inflation… This morning we get UK services PMI and EU PPI. Good luck..