Retail Sales, FOMC Minutes, Pound, Inflation and Oil

The main event of yesterday in terms of news, of course, was the absence of war. As a result, the mood on the eve of the publication of data on retail sales in the US was optimistic.

Markets were expecting US retail sales to rise 2%. But the fact exceeded the most optimistic expectations: retail sales rose by 3.8% in January. The reasons are not only the growth of consumer activity, but also inflation. So the markets were in no hurry to rejoice in anticipation of the publication of the text of the minutes of the last FOMC meeting.

The US Central Bank did not keep itself waiting and reminded that the rate hike in March is a settled issue, and the reduction of the Fed's balance sheet is not far off. In general, buying on the stock market now is too risky and premature. Markets must absorb the fact of the change in the vector of monetary policy, as well as the speed and scale of this.

Among other news, it is worth noting inflation data from the UK. As usual, the facts exceeded expectations: consumer prices rose by 5.5% over the year, and industrial inflation came out at the American level of 9.9%. That is, inflation in the country is at 30-year highs. As a result, there is every reason to expect further aggression from the Bank of England. In this light, we recall our idea to sell the EURGBP pair, counting on the growth of the interest rate differential in favor of the pound and its subsequent strengthening against the euro.

A little bit of the oil market in the end. We have already written that oil growth in recent years was mainly associated with geopolitical instability, and before that, the inability of OPEC + to increase production caused concern. So, if the first factor, apparently, will lose relevance in the foreseeable future, the second, on the contrary, can increase it.

Just yesterday, the International Energy Agency released a number of figures clarifying the current state of affairs. The 10 members of the Organization of the Petroleum Exporting Countries, which are subject to quotas, produced 23.9 million barrels per day in January, compared with a target of 24.6 million barrels per day, according to the IEA.

In general, when the dust of the information war settles, it is OPEC + that will determine the future of the oil market and prices on it.
We remain optimistic in the sense that we believe in the market rebalancing and the upcoming deep price correction. The price of $100 per barrel now does not suit everyone, because it continues to accelerate inflation and even the OPEC countries, no matter how paradoxical it may sound, are interested in reducing price pressure.

Well, let us recall that high prices give rise to the activation of American oil producers. U.S. shale crude oil production is expected to rise by 109,000 bpd in March to over 8.7 million bpd.