Morning Update – 02/03/2017 – by Arjun Lakhanpal

Morning all.. Wall St soared and closed up nearly 1.5% as investors believe the growth story coming from the global economy and Trump promising spending. Asia stocks took up the baton with Nikkei closing up 0.88% based on a decent rally on Wall St and the rise in USDJPY. USDJPY made a high of 114.21, above yesterday’s highs. EUR also weaker and testing below yesterday’s lows but within a tight range. GBP was slightly lower, on the back of the higher USD. BBC Sources: Govt will seek to overturn House of Lords Brexit Bill defeat when Upper House voted 358 to 256 to guarantee rights of EU nationals living in UK after Brexit; MP’s will have chance to remove amendment when Bill returns to Lower House. GBP/USD made a low of 1.2260. OBR Bean: benefits of BoE’s asset purchases are less now than during height of financial crisis; if further stimulus is needed , need to look in other directions – fiscal or structural. Still a lot of discussion regarding the Fed and a March hike. Fed’s Brainard (Voter, Dovish): improved global conditions and continued growth mean we are ready for a rate hike “soon”; Fed nearly at employment/infl tgt, will allow continued gradual pace of hikes; risks to outlook have been balanced for some time; balance sheet policy should be subordinate to rate tightening as its impact is less well understood, but action needed on balance sheet when “comfortable distance” from zero rates; expansionary fiscal policy could require more aggressive rate hikes. Japan Fin Min: further widening in interest rate differentials would mean USD would further strengthen against JPY; higher yields in US will have a big impact on Asia; will begin talks with US on economy in April.. This morning the focus is on EU inflation as we get CPI from the EU along with PPI data. We also get UK construction PMI. Good Luck..