Oil prices posted material gains on Tuesday before the release of inventories report from the API but continued to stay under pressure due to uncontrolled production increase in Libya, which exceeded 1M barrels per day. In April, production in the country eroded by the civil war was only 500 thousand barrels per day. On July 22 there will be a technical meeting of OPEC members and Russia in St. Petersburg. The goal of the meeting will, of course, be attempts to press Libya and Nigeria exempted from quotas curb production. Progress in the negotiations is likely to significantly encourage the oil bulls, given that the uncontrolled output of some cartel participants is one of the main factors affecting prices along with the US shale.
The pound is declining as the chance of a rate hike by the Bank of England is falling, after a weaker than expected rise in inflation. The key indicator for the first time since October has decreased to 2.6% with a forecast of 2.9%. It is important to understand whether this decline was due to seasonal factors or it was the reason of Pound appreciation or the inflation rate actually stabilized. The moderate decline in GBPUSD after the release of data indicates that the markets are in no hurry to withdraw the rate hike from the Bank of England, given that some members have already spoken out positively about this. Earlier, Bank of England President Mark Carney stated that the regulator is ready to get through the turbulence period with inflation exceeding the target level, since low rates are still needed to restore the economy and it is still unclear how much inflation has hit household spending.
At the last meeting, 5 out of 8 Bank of England officials voted to keep rates, but later the pressure of the "hawks" intensified, including the statements of the chief economist Andy Haldane that he might support an increase in borrowing conditions at the next meeting. For a pair GBPUSD there is a strong correction, the struggle has unfolded around the level of 1.30. Now, Mark Carney has strong arguments to continue to uphold the dovish stance at a meeting on the third of August.
The US currency fell sharply against its main opponents after two more senators rejected Trump's healthcare reform, delivering a crushing blow to his agenda, drastically reducing the likelihood of the successful implementation of his fiscal and tax plans. The chances for a third interest rate increase have grown, but remain below 50%.
The pound is declining as the chance of a rate hike by the Bank of England is falling, after a weaker than expected rise in inflation. The key indicator for the first time since October has decreased to 2.6% with a forecast of 2.9%. It is important to understand whether this decline was due to seasonal factors or it was the reason of Pound appreciation or the inflation rate actually stabilized. The moderate decline in GBPUSD after the release of data indicates that the markets are in no hurry to withdraw the rate hike from the Bank of England, given that some members have already spoken out positively about this. Earlier, Bank of England President Mark Carney stated that the regulator is ready to get through the turbulence period with inflation exceeding the target level, since low rates are still needed to restore the economy and it is still unclear how much inflation has hit household spending.
At the last meeting, 5 out of 8 Bank of England officials voted to keep rates, but later the pressure of the "hawks" intensified, including the statements of the chief economist Andy Haldane that he might support an increase in borrowing conditions at the next meeting. For a pair GBPUSD there is a strong correction, the struggle has unfolded around the level of 1.30. Now, Mark Carney has strong arguments to continue to uphold the dovish stance at a meeting on the third of August.
The US currency fell sharply against its main opponents after two more senators rejected Trump's healthcare reform, delivering a crushing blow to his agenda, drastically reducing the likelihood of the successful implementation of his fiscal and tax plans. The chances for a third interest rate increase have grown, but remain below 50%.
This analysis is provided as general market commentary and does not constitute investment advice. Past performance is not indicative of future results