Big support test for Brent, GBP falls following Bank of England meeting
19:00, 09 December 2015
· By CMC Markets
Brent crude oil has been retreating overnight and is currently testing $40.00 a big round number psychological support level. Should this hold it would suggest oil has started to stabilize. Should it fail, however, it would signal the start of another downleg for oil with the next big support test near $35.00 on WTI. Gasoline has bounced 2.4% overnight while natural gas, which has been trading just below $2.00 could be active around the storage report due later this morning.
Oil sensitive currencies are flat to slightly lower with NOK falling more than CAD. In its monthly report, OPEC raised its 2015 demand forecast slightly citing improvements in Europe, raised its 2016 demand forecast for OPEC oil and cut its non-OPEC supply forecast, which could all help to stabilize the market next year should the come about as anticipated.
It’s been a big day for central bank news. GBP is falling as the Bank of England kept interest rates steady again, while the FTSE has clawed back some of its earlier losses on the news. The street appears to have taken comments in the minutes related to the fiscal policy drag on the economy and that UK monetary policy is not mechanically linked to other central banks like the Fed or ECB as moderately dovish.
The Swiss National Bank maintained its negative interest rate and indicated it continues to intervene in forex trading to keep CHF down, which is down against USD but up against EUR. NZD is up moderately today after the RBNZ gave back the last of 2014’s four rate increases cutting 0.25% to 2.50% as had been widely expected. The RBNZ suggested it’s probably done cutting rates for now but also tried to talk down the dollar again.
The biggest action in forex trading overnight has been in AUD which took off on a much stronger than expected Australian report which saw good follow through on employment gains rather than the retrenchment that had been expected. The S&P/ASX dropped back a bit possibly due to the higher currency but more likely following the Hang Seng and reflecting CNY declines on soft China sentiment.
EUR has dropped back a bit in another normal trading correction after running into resistance at $1.1000 again yesterday.
Stock market action has been mixed overnight in Asia Pacific and European trading. US markets are trading flat trying to regain their footing after yesterday’s declines and ahead of tomorrow’s US retail sales report.
There have been no major corporate announcements so far this morning.
Significant announcements released overnight include:
Switzerland benchmark rate (0.75) no change as expected
UK interest rate and QE 0.50% and £375B no change as expected
UK MPC voting 8 for no change, 1 hawkish dissenter, same as last month
NZ RBNZ interest rate 0.25% cut to 2.50% expected
South Korea interest rate 1.50% no change as expected
Australia employment change 71K vs street (10K)
Australia full-time jobs 42K vs previous 40K
Australia part-time jobs 30K vs previous 19K
Australia unemployment rate 5.8% vs street 6.0%
France consumer prices 0.1% vs street 0.2%
France industrial production 0.5% vs street (0.1%)
Sweden consumer prices 0.1% vs street 0.2%
Norway consumer prices 2.8% vs street 2.6%
UK trade balance (£11.8B) vs street (£9.7B)
Greece industrial production (1.9%) vs street 0.9%
Greece consumer prices (0.7%) vs street (0.5%)
Greece unemployment rate 24.6% vs street 24.5%
Upcoming significant announcements include:
8:30 am EST Canada new house prices street 1.3%
8:30 am EST US jobless claims street 270K
10:30 am EST US natural gas street (65 BCF)
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