Morning Update – 07/02/2017 – by Arjun Lakhanpal

Morning all.. Wall St had a rather quiet session compared to bonds and the Dollar with both the dollar and US yields falling. The S&P managed to end the session with a marginal 0.2% loss and Asia followed suit with the Nikkei down 0.35% which was not bad considering that USDJPY fell through what some see as critical support at 112.00 in NY. We have gone on to make a low print of 111.60. But most of the USD weakness has been against the JPY with EUR and GBP lower; EURJPY taking a big knock over the last 24 hours and printing a low so far at 119.58. AUD remains pretty solid after the RBA left rates unchanged as fully expected. Traders suggest that to price cuts, they think we need to see a weaker Aussie housing market and an uptrend of the unemployment rate.  At present few see hikes, given how low the inflation track is – which means the carry in the first few years of the curve remains attractive.  The AUD has a clear path to appreciate, some suggest and the falling dollar may help they say. The EUR remains week; ECB’s Coeure (Le Parisien): euro is at appropriate level for economic situation in Europe; France does not have room for fiscal stimulus, leaving euro would threaten jobs/savings; Greece needs overhauls to prosper within the euro.. German IP came in much weaker than expected earlier this morning. ECB President Draghi stated in his speech to the European Parliament that underlying inflation remains ‘very subdued’, which is mainly driven by domestic cost pressures. ECB’s Villeroy (Il Sole): ECB remains committed to active monetary policy…US 10yr yields fell to below 2.4% in Asia. This morning we get the French Trade balance and UK House price index from Halifax. Good luck..