OPEC Maintains Production | No Love For The Dollar | UK Data Under Focus
International market commentary
Broadly speaking it appears that the next move for the equity markets is still to the upside. Global equity markets have
started the year on the front foot, and the US markets are printing “another record high” headlines. European and US
futures are trading higher encouraged by the strong Chinese economic data reading. The gauge of services industries
confirmed that the growth is robust and this has been enough for traders to push the Asian markets higher.
The dollar index failed to gain any momentum, as the FOMC minutes confirmed that the Fed is in no rush in adopting any
aggressive methods with respect to their interest rate hike. Gradual interest hike was the primary message for the
markets from the FOMC minutes yesterday and this made investors to push the treasury yields higher.
From the minutes, it is evidently clear that the Fed is finding solidarity within the tax cuts, as it would comfort
their inflation concerns but also support the growth equation too. Perhaps, it is the fiscal policies that would be able
to fill the gap. Also Flattening yield is keeping many awake during the night, but this is untrue for the Fed, as
minutes were released yesterday confirming the unified message “flattening yield is no longer an indication for any
signs to worry”.
The banking industry is literally the heartbeat of London and London is the heart of the UK. If Theresa May does not
create a good deal for the banking sector that helps banks to run efficiently, the chances of London remaining as the
centre of attention will diminish further and it would also create more pain for the UK economy.
The ongoing game of bluff which Michael Barnier is playing (which says there will be no special deal for financial
services) is not the way to kick start the negotiation process for the post Brexit ties with the European Union. Traders
will be keeping a close eye on this development, and on the upcoming services and composite data. We expect these
numbers to show some encouraging signals with the reading of 54 and 55 respectively.
While the protesting situation in Iran continues to accelerate, the latest figures are showing OPEC has kept its
production steady at 32.47 million barrels a day. Lower Libyan oil production opened the room for Nigeria to fulfil the
gap. The most important point to seize from this is the OPEC production number, the cartel has sent a strong signal to
the oil market that they are committed to their production cut, and they are kick-starting the near year when the
compliance sits at 121% which was at the same level as November. For brent, the near terms support is at 63.80 and the
resistance is at 70.03.