Forex Signal Provider Update On Copper Getting Hammered Just Like Oil
GBP/USD is currently trading just above the 1.5200/1.5210 level, GBP/EUR is about 1.2895 (just trying to break into those 1.29’s). Sterling’s higher over the course of Tuesday’s session despite a fall in inflation to the joint lowest level since comparable records began back in 1989. CPI came in at 0.5%, which was worse than the 0.7% the market expected, worse than the 0.6% that I was looking for and the fall from 1% previously was the biggest fall that we have seen or the largest fall that we’ve ever seen in a single month as I’ve said since records began. Now this is quite a tale of two stories at the moment, quite transitory the moves that we’ve seen in inflation at the moment. Obviously a lot of it has to do with the falls in oil prices and the falls in food prices that we’re seeing.
Oil prices over the course of the past month is down around 10%, food prices is down around 2%, energy prices in total – gas, electric also falling by about 1.5% – 2% as well. Those can’t be sustained over the course of the next couple of months, but then we may see further oil price falls of course and therefore we’re likely to see a bounce back for inflation throughout the course of the year. Where is that going to come from? Hopefully, it come from wages, business are starting to expand and they are happy to pay higher wages to their employees and inflation is starting to pick up from there as people have more spending money and therefore go out and purchase more.
In the short term for the economy, this is a good thing. No one out there wants to pay more for a basket of shopping, no one out there says “I really miss paying £100 to fill up my car”. So in the short term, the disposable income is now flooding into UK consumers and worldwide consumer pockets and it is a good thing for their respective economies. It means interest rates expectations have moved out along the curve, which means cheaper loans, cheaper mortgages for people as well at the moment. Obviously, if you’re a central banker, this is a bit of a problem, because you therefore have to explain to people why inflation is so low – down to 0.5%, whereas core inflation i.e. taking out those moves by oil and food is still high around 1.3% or still relatively close to target.
I think the Bank of England would continue to look through this oil falls, they’re happy to lean on them at the moment and say we don’t want to raise rates, but as it stands if that continues through the rest of the year, they’re going to start to educate the populace, start to educate businesses about the differences between headline and the core prices. As I’ve said, Sterling is moving higher as a result of that on Tuesday. A forex signal provider prediction at rates going up is neutral right now.
The key thing today with the European Court of Justices ruling as to whether ECB stimulus plans that have been made legal within the Eurozone. The OMT plan which hasn’t been activated yet which would see the European Central Bank go out there and buy an unnoted amount of bonds from a member state if it needed to enter itself into the European stability mechanism and submit itself to further bailout from the IMF or the EU for example. The German Constitutional Board had problems with this and said that it was illegal, the European Court of Justice is ruling on that today. While these happened back in 20011, as I’ve said the OMT programme hasn’t been used this yet, it does has very real consequences for any stimulus package that the European Central Bank may be planning or may be announcing in eight days’ time. As I’ve said that comes out at 08:30 BST. Apart from that US retail sales is expected later today as the main data announcement over the course of the day.
Commodity prices continue to fall lower, we know that oil is continuing to fall lower, copper’s joining in on Tuesday – Copper had its worst 1-day performance in 6-years on Tuesday, down 8.7% as people are starting to worry as more and more surprise is coming on to the market, but industrial producers say the demand isn’t really there.
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