Yesterday’s market action

Yesterday saw a large-scale decline in the price of oil; the break lower from the $53bbl handle extended to well below the $51bbl in the wake of the largest weekly build in US Crude stocks since 2001. A build of 10.949 million barrels allowed crude to break out of its tight inert range to test several key areas of support. It now trades marginally higher but remains firmly below the $52bbl handle. Last night saw the release of the hotly anticipated FOMC minutes and market participants took these as slightly hawkish. Comments from the majority members outlined that they had not lost hope for normalisation. There were two noted members who believed June was still on the cards but we believe that this is highly unlikely. Although the distressingly low non-Farm Payroll release last week could and should be argued as a one off, it is nonetheless still an alarming omen for potential for data to come. As the FOMC remains dovish in the medium term we feel that a rate hike is currently unfeasible with declining data, which the FOMC has openly pegged their outlook to, and a strong dollar hurting corporate earnings. This earnings quarter is likely to disappoint on the whole; overnight we saw Alcoa, the US’ leading producer of “Aluminum” posted a beat on the earnings-per-share but a miss on revenue and also downgrade their global outlook on aluminium demand. In addition to the developments in US monetary policy we also saw the Swiss auctioning the first 10year note with a negative yield and the Mexican central bank release its first 100year euro-bond. Best of luck to both parties on that one.


Today’s View

This morning we saw the UK trade balance post lower than expected with a reading of -£10.34bn, lower than the expected -£9bn. We also saw that the Greek unemployment rate fell to 25.7%, beating the expected 26.2%. We have since seen the Euro lift against both the dollar and sterling albeit in a muted fashion. The majority of traders took hold of the GBPUSD short from this morning, capitalising on the technical breaks of pivot support and the 1.4800 handle. This afternoon we have headline risk from Initial Jobless and Continuing Claims, expected at 283k and 2350k respectively. We haven’t had any seasonal factors affecting this number or weather effects so we believe that this number will remain below 300k, if not in line with expectations. In order for the Fed to be able to maintain a 2015 lift-off outlook, this data continually beating expectations will be of paramount importance, especially with the large miss on Non-Farm Payrolls last week. We also have Wholesale inventories for February so the resulting reaction is likely to be somewhat muted. We also have the BoE MPC meeting today at 12pm which is likely, with some degree of certainty, to yield no opportunities whatsoever.

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