Fundamental Analysis 2017.07.17 - UK CPI, Crude and USD

GBP made waves yesterday after the CPI announcement failed to meet forecasts. Now that CPI is out of the traders’ minds, they will be turning their attention towards the BoE’s forecasts.
Inflation data came in under expectations both in the UK and New Zealand, in addition to the BoJ overnight decision to reevaluate its stance on raising its inflation target – lowering it – brings to the forefront an interesting economic disparity – although signs of growth are becoming more evident, inflation is still remaining low. Banks across the world are dovish though, largely due to the fear of inflation outpacing consumer buying power. Certain economists point towards e-commerce competition and their lower retail prices being a disinflationary factor. Ramped up investments in automation could also be a factor negatively impacting wages, which explains how higher employment doesn’t necessarily lead to a higher inflation rate.

Canadian CPI data is due on Friday. The forecast will not deviate from the global trend – and inflation is speculated to be sluggish even though the Canadian economy is robust and growing at the moment.




AUD, coming in contrast to the world’s other major currencies continued to grow after the release of the Reserve Bank of Australia’s minutes, which showed that the bank’s members decided to increase the neutral interest rate by two points above the current rate. This is where the AUD separated itself from other major currencies – this could spell an imminent rate hike in the currency’s future.
Traders’ go-to safe-haven CHF also felt the benefits of US political turmoil and off-loading of European stocks..
Oil also saw an increase due largely to Saudi Arabia statement that it will continue as a swing producer. Reports showed that the Saudi production will not be exported as heavily - lowering it by 1mn barrels a day less than the current exported amount which seeks to offset ramped up Libyian and Nigerian production. .
Today’s market
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The only news for today comes from the American Continent - Canadian manufacturing sales forecasts speculate a slight dip from last months level’s. Although the figures can’t be characterized as stable, there does seem to be a growth trend. Overall though a increase is expect, just a little bit more conservative than the last 6 mo. average.



US building permits and housing starts are both speculated to grow. Construction industry payrolls seem to be increase the previous month which, employees, which can be extrapolated, will be used to meet increasing demand.
On a micro timeline housebuilding will most likely boost the dollar, this comes with a caveat of course: both rental and housing prices are used as a measure inflation. An increase of housing would mean pressure on rents, translating into lower inflation. As most traders know, lower inflation usually means lower currency prices. .



The Department of Energy’s Crude Oil inventory is forecasted to lose 3.5k b/d. The American Petroleum Institute (API) though increase its reserves by 1.6mn barrels. If the data validates that speculation, price of crude could slip signifigantly.




This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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