Market waits for Carney’s testimony

January 26th: Highlights

• BOE Gov Carney Speaks
• Sterling under pressure as economic stability concerns grow
• US Consumer Confidence
• Fed could signal concern over economic outlook
• Euro remains softer after dovish ECB

Sterling Comment

Global Comment

Yesterday was a pretty slow start to the week, light on economic data. Once again, oil dominated proceedings, as the latest rally seems to have run out of steam. We saw most of Friday’s 9% gains given back yesterday, with news of record output from Iraq and Saudi Arabia announcing that they will continue to invest in energy products.

Opec’s secretary-general called for rival oil producing countries to put a ceiling on their output, warning that oil producers will continue to suffer without cooperation and an end to the supply glut. He claimed that the majority of the additional supply last year came from non-Opec countries. Russian producer, Lukoil, has echoed this, suggesting that Moscow needs to start working with the cartel to cut supply to the market. The trouble is that there are a lot of broken promises between oil producers (with years of precedent!) so when Lukoil claim they would rather sell one barrel of oil at $50 than two at $30, the reality is that a buyer with $60 can change their intent all too easily.

The sharp decline in oil impacted sentiment, drove equity markets lower (S&P down 1.6%/Nikkei down 2.4%) and moved FX flows towards safe haven plays such as the Japanese yen, whilst the commodity currencies (AUD, NZD, CAD & ZAR) are all weaker by about -0.5% but the Russian Ruble took the biggest hit with a -3.2% drop,

Expect another slow day for data today. European data only extends to Switzerland’s trade surplus and Sweden’s producer prices. A handful of US figures cover house prices, consumer confidence and the provisional PMI services, so the Treasury Select Committee questions on UK financial stability will probably be the main event.

Have a great day!