IronFX Daily Commentary by Sakis Paraskevov | 20/01/2016
January 20, 2016 9:32 am
Oil plummets below $28 • US crude oil fell to its lowest level since September 2003, on concerns over a global supply flood. • The International Energy Agency (IEA) said the global oil supply was set to last and that oil markets could “drown in oversupply”. • On top of that, the recent end of sanctions on Iran, simply added to worries of an already oversupplied market. • What’s more, Chinese President trip on Tuesday to Saudi Arabia and later this week to Iran may put further downward pressure on oil prices, if these countries compete over oil sales share to their largest crude oil importer.
The highlight of the day: Bank of Canada policy meeting • The forecast is for the Bank to remain on hold and leave rates at 0.5%. On the contrary, the implied market probability for a 25 bps rate cut has soared to 73%. • Given the extent of expectations for an easing, risks around the meeting are asymmetrical, with any disappointment likely to generate a bigger market reaction than the anticipated cut. • Since oil prices continued trading lower since the last BoC meeting, deteriorating further Canada’s energy related investments, and given that Governor Poloz recently left the door open for further rate cuts, we expect the Bank to lower rates to support the softening economy in the foreseeable future, if not at this meeting.
Today: • UK: The unemployment rate for November is forecast to have remained unchanged, while average weekly earnings are expected to have slowed further. Overall, a soft report could push market expectations of a BoE hike even further back and put GBP under renewed selling interest. • US: CPI data for December. Both the headline and core CPI rates for December are expected to have accelerated. Following the decline in the PPI rate for the same month we see a high likelihood for the CPI to accelerate less than expected. This could cause USD to give back some of its recent gains. Housing starts and buildings permits for December are also coming out. • Speakers: Bank of Canada Governor Stephen Poloz will hold a press conference following the rate decision.
Oil plummets below $28
• US crude oil fell to its lowest level since September 2003, on concerns over a global supply flood.
• The International Energy Agency (IEA) said the global oil supply was set to last and that oil markets could “drown in oversupply”.
• On top of that, the recent end of sanctions on Iran, simply added to worries of an already oversupplied market.
• What’s more, Chinese President trip on Tuesday to Saudi Arabia and later this week to Iran may put further downward pressure on oil prices, if these countries compete over oil sales share to their largest crude oil importer.
The highlight of the day: Bank of Canada policy meeting
• The forecast is for the Bank to remain on hold and leave rates at 0.5%. On the contrary, the implied market probability for a 25 bps rate cut has soared to 73%.
• Given the extent of expectations for an easing, risks around the meeting are asymmetrical, with any disappointment likely to generate a bigger market reaction than the anticipated cut.
• Since oil prices continued trading lower since the last BoC meeting, deteriorating further Canada’s energy related investments, and given that Governor Poloz recently left the door open for further rate cuts, we expect the Bank to lower rates to support the softening economy in the foreseeable future, if not at this meeting.
Today:
• UK: The unemployment rate for November is forecast to have remained unchanged, while average weekly earnings are expected to have slowed further. Overall, a soft report could push market expectations of a BoE hike even further back and put GBP under renewed selling interest.
• US: CPI data for December. Both the headline and core CPI rates for December are expected to have accelerated. Following the decline in the PPI rate for the same month we see a high likelihood for the CPI to accelerate less than expected. This could cause USD to give back some of its recent gains. Housing starts and buildings permits for December are also coming out.
• Speakers: Bank of Canada Governor Stephen Poloz will hold a press conference following the rate decision.
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