Morning Update – 19/01/2017 – by Arjun Lakhanpal

Morning all.. Wall St had a quiet and rather mixed session, finally closing up 0.18% in the S&P but marginally lower in the Dow. However Yellen suggesting a strong economy and more hikes saw the dollar rise and this seems to have installed confidence in Asian stocks, possibly as USDJPY bounced aggressively, which saw the Nikkei rise almost 1%. Whilst the dollar surged against the JPY it was more of a subdued move against AUD (even with weaker unemployment data) and GBP with GBP holding around 1.2270 for most of the session. UK PM (Sun): promised to protect rights of EU citizens living in the UK and those of UK citizens living in single bloc; pledges to build a better Britain that works for ordinary people. But it was Yellen that got the dollar back in demand.. -Fed’s Yellen (Dove): waiting too long to raise rates could force the Fed to hike aggressively, pushing economy into recession; as of December she expected a few rate increases per year through to 2019 where rates will be near to longer-run neutral rate of 3% by 2019-end; December hike reflected confidence that US economy will continue to improve; makes sense to reduce monetary policy accommodation gradually as the economy approaches the Fed’s goals; near max employment and moving toward inflation goal; sees 4.75% unemployment as full employment. USDCAD rallied steeply as BoC’s Poloz (in presser): rate cut remains on the table should downside risks materialize; no compelling need to mention or not mention whether rate cuts had been discussed or not and also a suggestion that Trump will tear up NAFTA. Oil also fell yesterday and is currently up 0.5%.. This morning we get the ECB rate meeting and Draghi press conference and this will dominate the European session. Good luck..