Euro Pressured by Political Uncertainties; Canadian Inflation in Focus

Here are the latest developments in global markets:

FOREX: Euro/dollar was under pressure during early European trading, trading lower at 1.2302 (-0.22%) as uncertainties in the political front loomed in the background ahead of the Italian general election and the German’s polls on whether Merkel’s Conservatives will formally lead the government under a coalition agreement with their former coalition partners, the SPD. Pound/dollar jumped to an intra-day high of 1.3993 (+0.14%). on hopes that the Bank of England would raise interest rates faster than expected according to the BoE Chief Economist, Andy Haldane’s hawkish comments on Wednesday. Euro/pound crawled down to 0.8818 (-0.18%). The dollar index eased to 89.89, while the dollar/yen edged down to 106.88 but both remained up on the day, gaining 0.18% and 0.14% respectively. January’s FOMC meeting minutes released on Wednesday indicated that policymakers were sanguine on the US economic performance and that inflation will likely rise further, enhancing the dollar’s strength. Aussie/dollar and kiwi/dollar extended their losses towards 0.7812 (-0.47%) and 0.7290 (-0.65%) respectively, being the worst performers among the majors. Dollar/loonie was flat at 1.2710 (+0.03%).

STOCKS: European stocks were steady in early European trading as the strong fluctuations in the market seemed to calm down, while a mixed flow of earnings releases restricted stock movements. The pan-European STOXX 600 was slightly up by 0.03% at 1015 GMT, with the French auto part maker Valeo being the biggest loser among the companies listed in the index as the firm’s profits plummeted in the second half of 2017 due to higher material costs and adverse exchange rate movements. However, rising shares in the telecommunication sector were able to offset this loss. The blue-chip Euro STOXX 50 was down by 0.05% driven by weaker healthcare and technology sectors. The Spanish IBEX 35 fell by 0.42% dragged by consumer cyclicals, while the Italian FTSE MIB rose by 0.22% after Telecom Italia chose Goldman Sachs and Swiss Credit to deal with the spin-off of the company which has been an unsolved issue for almost a decade. The German DAX 30 inched up by 0.01% and the UK’s FTSE 100 declined by 0.30%. US stock futures were in the green.

COMMODITIES: Oil prices were on the backfoot after the latest EIA report fueled concerns that OPEC’s efforts to curb supply would get harmed by rises in US oil production. Particularly the EIA figures indicated that the US oil production hit a record high in monthly terms while the US oil exports jumped near to all-time highs. WTI crude declined by 0.66% to $62.39 per barrel and Brent retreated by 0.71% to $65.94/barrel. In precious metals, gold fell by 0.18% to $1329/ounce.

Day ahead: Canada releases inflation figures

At 1330 GMT, Canada will hand out data on consumer prices for the month of January, with analysts projecting the headline CPI to slip to 1.4% y/y after previously rising by 1.9%, holding within the Bank of Canada’s target range of 1.0% – 3.0%. On the monthly basis, however, the gauge is expected to bounce by 0.4% following a decline by the same proportion in the preceding month. Measures of core inflation (that exclude volatility) preferred by the Bank of Canada, involving the trimmed-CPI, the median-CPI, and the common-CPI will be also in focus.

In oil markets, investors will be waiting for the Baker Hughes oil rig counts to give further clues on future US oil production at 1800 GMT. Note that, the number of active drilling rigs was rising the past four weeks, pressuring oil prices.

In terms of public speeches, the Bank of England’s Deputy Governor, David Ramsden, will take part in a panel discussion on productivity and economic rebalancing at 1200 GMT. In the US, the New York Fed President, William Dudley (1515 GMT), the Boston Fed Governor, Eric Rosengren (1515 GMT), and the Cleveland Fed President, Loretta Mester (1830 GMT), will discuss on monetary policy before the 2018 US Monetary Policy Forum. The ECB board member, Benoit Coeure, will also join the event, giving a speech at 1830 GMT. Meanwhile, the president of the European Commission, Jean Claude Junker and the president of the European Council, Donald Tusk will be holding a news conference at 1700 GMT after the European Union heads of state and governments meet for an informal summit in Brussels.

In other areas of interest, Brexit news would attract attention the following days after the media reported that the UK Prime Minister, Theresa May backed those ministers who wanted the UK to take back control of its own regulations during yesterday’s eight-hour meeting with the Cabinet. Next week, May will meet EU leaders, probably giving a clearer picture of the UK’s stance over the country’s partnership with the block.