Mainland European indices are leading the way in early trade, with the FTSE 100 trailing thanks in part to declines from the heavyweights AstraZeneca and Rolls-Royce. Today marks the beginning of a week that looks set to be dominated by UK-related economic news, as traders gear up for the release of employment Inflation, GDP, and retail sales data spanning the rest of the week. The pound has held up well in early trade today, with markets increasingly pricing a somewhat patient approach from the Bank of England this year. Crucially, MPC members are likely to become increasingly concerned at the stubbornly high wage growth figure, with markets expecting a resurgence in average earnings that could further delay any dovish pivot at Threadneedle street.
Energy traders look set for a busy week ahead, with crude oil prices looking to build on last week’s $4 rise in WTI. This week sees both OPEC and the IEA release their latest monthly reports, with markets keeping a close eye out for any updated supply and demand forecasts. Thus far we have seen the record US output keep a lid on global oil prices, with markets casting aside the historic disruptions to global trade through the Red Sea. However, the recent Saudi decision to reverse the planned 1 million bpd production increase from Aramco highlights the continued efforts to support prices in an oversupplied market. While some will hope that we will soon see a stimulus-led resurgence in Chinese economic activity, we are yet to see any tangible signs of a bounceback that might lift assets such as oil.
Indices will be waiting patiently for tomorrows US inflation data, with markets predictions of a sharp 0.5% decline in the headline CPI figure provide a potential tailwind for equities. Coming after a period that has seen markets reprice from five rate cuts to five this year, dollar bears will hope that a sharp decline in the inflation rate will help lift risk assets and dampen demand for havens. Nonetheless, the pathway back to 2% remains a difficult one, and recent Fed comments that we could only see 2-3 cuts this year should highlight the potential for another move higher for the dollar over the coming months.
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