It’s been a slow start to trading on Friday, with the lack of major news flow or notable releases meaning traders are left to digest the events of the last couple of days.
It’s difficult to read too much into moves in equity markets with today being the expiry of June futures and options – otherwise known as quadruple witching – likely playing a big role. It’s been a quiet morning so far in Europe, with the only notable data being the final inflation figures from the eurozone – both of which were unchanged, as expected – which is unlikely to have had much of an impact.
We do have more data to come from the United States around the open on Wall Street, with building permits, housing starts, UoM consumer sentiment and inflation expectations figures all being released. The Fed raised interest rates earlier this week and signaled one more this year but traders still appear unconvinced, with another hike by December only around 45% priced in. How the data performs between now and the end of the year should see the gap between the two close in the months ahead and today’s figures could offer some interesting insight, particularly the consumer and inflation numbers.
We’re seeing a small bounce in oil this morning as we await the Baker Hughes rig data later in the session. Brent and WTI crude have come under significant pressure since oil producers agreed to extend cuts by another nine months in a bid to rebalance the market and bring inventories back to their five-year average. Whether US output will offset these cuts or a significant portion of them, will be seen over the next year or so but as long as we keep seeing the rig count climb, prices could remain under pressure. Brent and WTI may have found some support around their May lows but should this level be breached, it could trigger another wave of selling and put pressure on producers to do more.
Sterling is making minor gains this morning, buoyed by yesterday’s vote on interest rates at the Bank of England. Three policy makers surprisingly voted for a hike, with the outgoing Kristin Forbes the only one to have done so recently. While this doesn’t necessarily mean we’ll see a rate hike anytime soon, it clearly indicates that policy makers are more hawkish than markets anticipated. Still, the pound’s gains against the dollar were capped around 1.28, reflecting the fact that downside pressure remains on the currency as a result of all the political uncertainty which comes at the worst possible time for the country.