Return to Insights

Monday Morning Update

Macro Monday, raised geo-political tensions and supply-side fears see oil prices continuing to rise, Fed policy makers interest rate decision on Wednesday, and today's release of Eurozone Harmonised Index of Consumer Prices.

Macro Monday

The current population of the planet is 8.1 billion people. In 2004 it was 6.5bn and in 1984 it was 4.78bn. By 2044 forecasts are that there will be 9.4 billion of us on earth – though they’re not sure if Elon will have made it to Mars by then.

Energy Prices Rise on Supply Side Fears

Oil prices have continued to rise on supply-side fears and raised geo-political tensions. Following last week’s rally, which saw WTI crude futures rise 4% over the five-day period, prices this morning rose above $81.5dbp hitting their highest level since early November. Meanwhile Brent crude futures appreciated over $85.75dpb, similarly hitting the highest price since early November.

As we looked at last week, Ukrainian forces ramped up drone attacks on oil refineries in the Russian interior striking places such as Ryazan, Kstovo and Kirishi. Collectively, the areas under attack account for between 7-10% of Russia’s oil processing capacity.

This comes as trade continues to be disturbed by ongoing disruptions in the Red Sea which sees around 10% of the worlds crude oil exports transiting through it.

Last week prices were also supported on the demand-side, with the IEA indicating that global oil demand is forecast to increase by 1.7 mb/d over the first quarter of 2024 given a more optimistic outlook for the US in addition to a rise in demand for bunkering.

Much of the increased demand for bunkering is a consequence of the trade flow disruptions. On the supply side the IEA wrote that “trade dislocations from the rerouting of Russian barrels and more recently due to unrest in the Middle East, have boosted oil on water by 115 mb”. This means that oil on water levels is at their second highest level since the peak of the pandemic.

All Eyes on FOMC

This Wednesday attention will turn to the FOMC, where Fed policy makers are making their latest interest rate decision and providing forward guidance through the release of their dot plot.

Here the consensus is projecting that the Fed will maintain their benchmark policy rates at their current 5.25-5.5% target range. This comes as markets continue to speculate on when the Fed will first cut and the extent to which they will do so throughout the year. For example, looking further ahead, implied money market expectations are pointing to around 75bps worth of cuts throughout 2024.

This marks a sizeable reduction to the 150bps worth of cuts that were previously being priced earlier this year and is indicative of how the market has readjusted their monetary loosening expectations given persistent inflation and a historically tight labour market.

For example, last Wednesday we learnt that US inflation rose 10bps last month, hitting 3.2% on an annual basis. This beat market expectations of 3.1% and demonstrated that the Fed continue to face headwinds in their fight to bring inflation back down to their 2% target rate.

All eyes are thus on the Fed at 18:00 on Wednesday, for the release of their dot plot and press conference half an hour later.

Eurozone HICP Print

Though today is a little light on the release of data, at 10:00 this morning, attention will turn to the release of the Eurozone’s Harmonised Index of Consumer Prices. Here, the market consensus is pointing to a month-on-month print of 0.6%, in line with the previous month’s print. On an year-on-year basis, it is expected to come in at 3.1% – again unchanged from January’s level.

Following the ECB’s policy meeting earlier this month – where Frankfurt held rates for the fourth consecutive time – markets will be looking to see how this morning’s print may impact interest rate expectations looking forward.

At their latest policy meeting, the ECB stated that they expect inflation to average 2.3% this year, before easing to 2.0% in 2025 and 1.9% in 2026.

Ready to talk FX?

Get in touch with one of our friendly and knowledgeable experts to see how FX strategy can drive commercial impact in your business.

Contáctanos

Related
Comentarios

Find out how we have helped our clients meet their hedging requirements.

Atentos a las declaraciones de Lagarde

La semana pasada, el par EUR USD logró recuperar un mal comienzo de semana, hasta alcanzar niveles mínimos de cinco meses...

¿Se descarta otra caída del par EUR USD en las próximas sesiones?

Las previsiones de recortes de tipos siguen protagonizando el debate de los inversores. Se estima ahora, según las declaraciones de Simkus, que el BCE reducirá sus tipos de interés tres veces en lo que queda de año...

El par EUR USD se recupera tras seis sesiones consecutivas de pérdidas

Hoy, durante todo el día, tendremos reunión del Eurogrupo, y contaremos con declaraciones de Luis de Guindos y Schnabel...

Powell sostiene que “la política restrictiva necesita más tiempo para funcionar”

Hoy contaremos con datos de IPC en la zona euro. Además, tendremos que estar atentos a las palabras de algunos miembros del BCE...

Las tensiones en Oriente Medio dan impulso al USD

Hoy contaremos con el Índice ZEW de sentimiento económico, tanto en Alemania como en la zona euro...

Qué esperar después de una semana con algunas sorpresas

Durante la semana pasada vimos una pérdida de terreno significativa frente al dólar americano...

Consecuencias de la decisión de tipos del BCE

La jornada de ayer estuvo protagonizada por la decisión de tipos del BCE. No hubo sorpresas en la reunión de la institución central...

La inflación americana revoluciona el mercado

Hoy conoceremos, a las 14:15, la decisión de tipos de interés del BCE, previsiblemente sin cambios. Además, contaremos con declaraciones sobre la decisión en una conferencia de prensa...

Encuentra más información con relación inteligentes en divisas
Contáctanos