📉 #MarketNews
🇺🇸 US: On many fronts, the US February CPI data was disappointing. Though rounding helped the year-over-year inflation rate nudge higher to 3.2% from 3.1%, against an expectation for no change. However, compared to a month earlier, when inflation shocked by a comparable margin, the market’s response has been rather restrained.
💲 Given this slight increase in inflation, we could expect a strengthening of the dollar DXY in the coming days. In the last few hours, DXY has been back above 103 points briefly. The EURUSD, surprisingly, has managed to stay above 1.09 the last hours, despite the US inflation data, the downward pullbacks failed to break these levels.
🌍 Europe: ECB Governing Council member Villeroy de Galhau suggested that the ECB would have agreed to start cutting rates in the spring. Later, he clarified that it is more likely to be June than April.
📉 On the other hand, things are not improving in Europe. Its industrial production released this morning shows a drop in industrial production of -3.2%. The biggest drop in almost 1 year, second only to the May 2023 drop of -3.8%.
🇬🇧 Meanwhile, in the UK, according to Andrew Bailey, the Governor of the Bank of England, the economy is close to or at full employment and there is now very little evidence to support the idea that higher unemployment is necessary to control inflation. Citi predicts the Bank of England will begin reducing rates in June. UK labour report showed a drop in employment, a rise in the unemployment rate, and a fall in wage growth. And while this isn’t great news, at least, they may play in favour of an earlier rate cut by the Bank of England.
📈 Additionally, the UK announced positive growth of 0.2% MoM for January this morning, marking the beginning of the country’s escape from recession. On the other hand, January’s industrial production unexpectedly decreased from 0.6% to 0.5% year over year.
🇯🇵 In Asia, as Governor Ueda said that Japanese consumption remained sluggish, the Japanese yen has showed a little more weakness, rising to 147.61. This virtually crushed expectations for a rate hike in March.
⛽ Commodities: In its most recent monthly report, OPEC maintained its demand projections, projecting growth in oil consumption above the IEA growth estimations. Oil consumption should be sustained, according to OPEC, by solid economic development in the main economies and reduced inflation brought on by expected interest rate reduction. OPEC production increased in February. Led mainly by production from Libya, Nigeria and Saudi Arabia. However, the additions were somewhat countered by drops in output in Iraq and Iran. The EIA estimates that U.S. crude oil production will continue to increase in 2024.
🌍 Geopolitics: Yesterday, in a non-binding vote, the majority of the French parliament voted in favour of a security agreement between France and Ukraine. Once again, a coalition of small parties around the bipartisan structure seems to vote against the general opinion of the population. In fact, both the left-wing LFI party and the right-wing RN party did not vote in favour.
🔥 Yesterday, Ukraine launched dozens of drones and missiles at targets in Russia in an attempt to breach the land borders of the largest nuclear power in the world and seriously destroy a significant oil refinery. According to Russian officials, there have been attacks on energy installations, such as the destruction of a drone near the second-largest oil refinery in Russia, Kirishi, and a fire at Lukoil’s NORSI facility.
