The FTSE 100 is trading marginally higher so far this morning after shrugging off some early weakness to end Tuesday’s session little changed. It’s a similar story for the pound which is fairly mixed on the day after yesterday’s decline, as comments in the late afternoon from BoE Governor Carney took the edge off the unexpected drop in inflation which saw some strong selling during the morning session.
GBPUSD holding above 1.30
There has yet to be a sustained follow through on the sharp selling seen in the pound, which occurred both before and after the CPI data for June showed disinflation for the first time this year. Whether the release marks a turning point for the cross, which has proven to be surprisingly resilient in the past couple of months, even with the shock outcome of the General election failing to provide a sustained move lower, remains to be seen. BoE Governor Carney described the data as “consistent” with the central bank’s projections and with these previously released projections suggesting that inflation would peak later this year, there could well be another rise in prices ahead. The comment shortly after the European close on Tuesday stemmed the decline in sterling but proved not enough for the currency to mount a serious recovery. Traders may now be looking to tomorrow’s retail sales figures for further data to aid their decision making in attempting to ascertain the path of least resistance going forward.
US Oil inventories could scupper recovery
Whilst the price of oil is pretty much flat so far for July, there has been attempts by bulls to recoup some of the post-OPEC declines. Brent, an international benchmark for the price of crude, slipped into bear market territory despite OPEC announcing an extension of their current production quota. The reaction saw a prolonged decline for around a month after the event but the past four weeks have seen around half of the losses recouped. Large declines in US oil inventories in the past two weeks have provided a reason for bulls to believe there is further gains to be had. However, last night’s API number, a smaller, private equivalent of this afternoon’s more widely viewed DOE release, showed an unexpected rise. A build later today would threaten to derail the recovery with the price currently not far from a potentially key resistance zone. A clean break back above $50 a barrel would be a welcome development for longs who would then grow in the belief that a return to the mid-50s seen prior to the OPEC meeting is increasingly possible.