Thursday 19 July 2018

Daily Market Update: Oil price gains continue

Oil pump industrial machine for petroleum in the sunset background.
Oil pump industrial machine for petroleum in the sunset background.

Richard Ramsey

The latest British Chamber of Commerce survey revealed a slowdown in the UK economy in Q1. Most of the surveys key indicators either stagnated or fell. While they still pointed to modest economic growth, the business group warned of potential downside risks. Domestic sales growth for manufacturers receded to the lowest level since the end of 2012, and for services this was the weakest since mid-2013. Overnight the British Retail Consortium-KPMG survey showed that UK retail sales fell 0.7% y/y on a like-for-like basis in March, which was well below the consensus for a 2% gain, while total sales were flat. This morning we get the latest CPI figures and ONS house price figures. The annual rate of CPI inflation is expected to edge up from 0.3% to 0.4%. Meanwhile the core-CPI measure, which excludes food and energy prices, is expected to rise to 1.3% for March.

There has been a distinct lack of incoming economic data over the last 24 hours. Nevertheless, there has still been some notable price action within financial markets. Oil prices have continued their recent rally and pushed through $43pb a short time ago. This represents the highest level since December and compares with January’s low of $27.1 per barrel. Sterling has recovered some of its recent losses on the fx markets and has gained 1% against the dollar over the last 24 hours. Cable has risen from $1.413 to $1.427 since yesterday’s open. Meanwhile EUR/GBP has fallen from 80.8p to 80.2p over the same period. EUR/USD is currently changing hands at $1.145, up from $1.142 at yesterday’s open.

In the absence of any top tier US economic data today, financial markets will focus on a number of Fed speakers. The Federal Reserve of Philadelphia President Patrick Harker, who has urged colleagues to “get on with” raising rates again, speaks later this afternoon. Following last month’s robust employment report, Harker may repeat his call for at least three hikes this year. The Federal Reserve Presidents of Richmond (Jeffrey Lacker) & San Francisco (John Williams) are also due to speak later today. Yesterday Dallas Fed President Robert Kaplan (non-voter) said he wouldn’t back an interest-rate increase this month in light of a puzzling weakening of economic growth, though a June tightening by the Fed remains a possibility.

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