Morning Update – 15/02/2017 – by Arjun Lakhanpal

Morning all.. Yet another record high for US stocks as Yellen appears more hawkish on the economy with S&P closing up another 0.4%.. Asia duly followed the US lead with the Nikkei up just over 1% as USDJPY rallied and held gains close to 114.50. Fed’s Yellen (Q&A): can’t say if rate increase will come March or June; faster wage growth above current rates would be consistent with Fed’s inflation objective; labour market pretty tight; pace of job growth strong, likely exceeds what’s sustainable in long run; must be careful not to let labour market get too tight.. The take from all this was that hikes are coming and Trump policies were not discussed as there are none officially yet.. USDJPY leading the dollar higher and BoJ’s Kuroda said inflation still far from 2% so will maintain powerful monetary easing under current framework; may cut yield target if global/local economic conditions warrant more easing; pace of BoJ buying is no longer its policy target so may fluctuate; like to cut short and long-term rate targets if further easing becomes necessary. This and the rising Nikkei keeping USDJPY bid but we remained in a very tight range last night. Kuroda also said if US hikes x3 this year it would increase risks for emerging economies; current USDJPY levels cannot be referred to as JPY weakness; clear that Chinese growth won’t continue, it’s about how & when Chinese economy turns sour.. This morning we get UK Unemployment data and EU Trade balance but the focus will be on US Retail sales and CPI this afternoon.. Good luck.