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Market watch - 19th January 2017


The Dollar had a better day yesterday as it gained back recent lost ground, which was encouraged by Fed Chair Yellen as she said that to leave hiking rates too long could force aggressive action and possibly push the economy into recession. She continued that growing divergences in US global rates is putting upward pressure on the US Dollar. Despite that there is a growing expectation that Trump might try to push USD lower to stimulate exports as a way to attack the Chinese manufacturing industry. With Trump’s inauguration tomorrow long and mid-term risk continue to rise.

This morning saw the release of positive unemployment claims and Philly Fed Manufacturing numbers from the US. Both numbers should help the US continue its recent positive streak and solidify any gains from yesterday.

The BoC held rates firm but the Canadian Dollar slipped after reports that a rate cut for Canada was still on the table. Combined with oil pushing lower and concerns over NAFTA agreement now that Trump was so close to his inauguration caused CAD to fall from the highs it had reached. This morning Manufacturing Sales came in well above expectations for Canada coming in at 1.5% increase over 0.2% expected. The data was overshadowed by the US numbers, and CAD continues to weaken against USD.

GBPUSD slipped lower despite average earnings coming in at 2.8% and the claimant count falling by 10k but much better than the 4.6k increases analyst expected. It could well have been unsettled by the HSBC CEO saying that he will move around 20% of UK markets revenue to Paris. Of course the markets are very aware of banking’s importance to the UK economy, and overnight Goldman Sachs announced it could reduce its staff by 50%. This is not good news for the city and will encourage fears over the effects of Brexit.