IronFX Daily Commentary by Sakis Paraskevov | 26/01/2016
January 26, 2016 9:56 am
ECB Draghi: ‘Meeting our objective is about credibility’ • ECB President Draghi vowed not to lower the ECB’s inflation target yesterday, stating that: “Meeting our objective is about credibility. If a central bank sets an objective, it can’t just move the goalposts when it misses it“. • ECB’s President defended the Bank’s current stimulus package by pointing out that a continued period of low inflation, even if oil driven, may become persistent if it destabilizes inflation expectations. • Draghi highlighted that one of the biggest risks would be doing nothing instead of acting. After last week’s comments following the rate decision that there are “no limits to how far we are willing to go”, many market participants now expect additional stimulus in March. Nevertheless, we remain cautious of the Governing Council under-delivering again.
OPEC Secretary-General calls for cooperation • OPEC Secretary-General has called for cooperation between oil-producing nations, even outside the cartel, to help stabilize oil prices. The vice-president of Lukoil, Russia’s second biggest oil producer, said they would not oppose a cut in output if it was politically backed by Russia. Saudi Arabia has also stated recently that it would consider cutting output if joined by large producers outside OPEC, such as Russia. • Oil exporting economies have been under increasing pressure lately, which increases the chances of a possible cooperation to raise and stabilize oil prices, especially if prices fall further.
Today: • US: The S&P/Case-Shiller house price index for November is forecast to have accelerated. The FHFA house price index for the same month is also coming out. The preliminary Markit service-sector PMI for January is expected to decline somewhat. The Richmond Fed manufacturing index for January is due to be released but no forecast is available. The CB consumer confidence index for January is expected to remain unchanged from the previous month. Given that the preliminary U of M consumer sentiment increased in January we see the possibility for an upside surprise in the Conference Board as well. This could support the dollar somewhat. • Speakers: Bank of England Governor Mark Carney will testify to Parliament on the latest Financial Stability Report.
ECB Draghi: ‘Meeting our objective is about credibility’
• ECB President Draghi vowed not to lower the ECB’s inflation target yesterday, stating that: “Meeting our objective is about credibility. If a central bank sets an objective, it can’t just move the goalposts when it misses it“.
• ECB’s President defended the Bank’s current stimulus package by pointing out that a continued period of low inflation, even if oil driven, may become persistent if it destabilizes inflation expectations.
• Draghi highlighted that one of the biggest risks would be doing nothing instead of acting. After last week’s comments following the rate decision that there are “no limits to how far we are willing to go”, many market participants now expect additional stimulus in March. Nevertheless, we remain cautious of the Governing Council under-delivering again.
OPEC Secretary-General calls for cooperation
• OPEC Secretary-General has called for cooperation between oil-producing nations, even outside the cartel, to help stabilize oil prices. The vice-president of Lukoil, Russia’s second biggest oil producer, said they would not oppose a cut in output if it was politically backed by Russia. Saudi Arabia has also stated recently that it would consider cutting output if joined by large producers outside OPEC, such as Russia.
• Oil exporting economies have been under increasing pressure lately, which increases the chances of a possible cooperation to raise and stabilize oil prices, especially if prices fall further.
Today:
• US: The S&P/Case-Shiller house price index for November is forecast to have accelerated. The FHFA house price index for the same month is also coming out. The preliminary Markit service-sector PMI for January is expected to decline somewhat. The Richmond Fed manufacturing index for January is due to be released but no forecast is available. The CB consumer confidence index for January is expected to remain unchanged from the previous month. Given that the preliminary U of M consumer sentiment increased in January we see the possibility for an upside surprise in the Conference Board as well. This could support the dollar somewhat.
• Speakers: Bank of England Governor Mark Carney will testify to Parliament on the latest Financial Stability Report.
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