Morning Report: 14 January 2016

14th January 2016 By: Ranko Berich

GBP Global markets have once again fallen into chaos on fresh declines in crude oil prices, and sterling is paying the price, particularly against the euro, which appears to be benefitting off safe haven flows. No sterling data was released, but the Bank of England’s Monetary Policy Committee will release its latest rate decision, alongside meeting minutes and a Monetary Policy Summary. The MPC was reluctant to even consider raising rates at its last meeting, and global financial conditions have hardly improved since then. No move on rates is likely, and, if the minutes reveal an MPC that is more pessimistic than it was last year, sterling could suffer even more as a result. The Bank of England’s released are scheduled for 12:00 GMT.

EUR The euro looked vulnerable yesterday, as a tentative sense of calm returned to markets. However, fresh falls in crude oil in the afternoon quickly created a fresh bout of turmoil, and the euro is significantly stronger this morning as a result. The fact that eurozone Industrial Production fell 0.7% in November was largely an afterthought, as investors flocked to EUR, CHF and JPY in search of safety. Today at 12:30 GMT, meeting minutes from the European Central Bank’s last rate-setting meeting will be released. Considering the ECB’s December actions were widely considered a disappointment and came as a shock to markets, the minutes may contain some interesting information for judging the ECB’s intentions in 2016.

USD Yesterday’s morning report noted that USD was performing well against “safe haven” currencies such as EUR and JPY, and poorly against risk currencies such as NZD and AUD. The reverse is now true, as the latest falls in crude oil have once again led to a wave of global risk aversion, and USD has made strong gains versus commodity currencies whilst performing poorly against EUR and JPY. Yesterday’s most important data releases were related to crude oil inventories, which were shown to have risen according to EIA data. In particular, soaring stockpiles at the important Cushing, Oklahoma delivery point continued to point towards a supply glut in the North American market. Today at 13:30 GMT, the Federal Open Market Committee’s James Bullard will speak, at the same time that weekly Unemployment Claims data will be released.

CAD Crude oil prices fell below $30 a barrel overnight, and the effects on the Canadian dollar were immediate and devastating. Considering no bottom is in sight for crude, which continues to regularly reach new lows, the immediate future looks very painful indeed for the loonie. Today at 13:30 GMT, the New House Price Index will be released.

UK News

  • Reuters. Oil’s fall, slow wage growth to weigh on Bank of England rate vote: The Bank of England looks likely to signal another delay in raising interest rates on Thursday thanks to a renewed oil price slump, sputtering wage growth and the approach of an unsettling vote on Britain’s European Union membership.
  • Reuters. Growth in ad budgets slows amid fears over UK economy: The number of British companies that raised their advertising budgets in the fourth quarter of 2015 slowed to its lowest level in nearly three years as concerns over the economy grew, according to an industry survey on Thursday.