• The GBP has recovered a little this afternoon after MPC inflation report hearings
  • Sterling had earlier dropped after unemployment rate rose for 1st time in 2 years
  • European PMIs drop but remain strong
  • Gold falls back after respecting key long term resistance
  • Oil.WTI technical overview ahead of inventory data
  • FOMC and ECB minutes imminent

It’s been a bit of a volatile day for GBP traders with the currency first falling lower before recovering some of those declines this afternoon. The resurgence came after a fairly hawkish set of comments from MPC members during their inflation report hearings. The stand out was arguably Governor Carney who in stating that the market pricing of the future rate path is about right, implying that another hike in May is odds-on.  

This saw the GBP move off its lowest levels of the day to trade little changed after earlier being the worst performer in the G10 space. Despite a pick up in the core wages reading this morning an unexpected rise in the unemployment rate – the first in 2 years- weighed on the Pound and saw it fall lower.

Unexpectedly PMIs from the major European economies came in vastly below forecasts as well as their prior values in February according to flash readings provided by Markit. While momentum slowed down quite noticeably, it does not suggest any abrupt slowdown in the European economy. Nevertheless, an inflection point could be getting closer.

A sharp move higher in Gold last week has bulls licking their lips in anticipation of a major  breakout but unfortunately for Gold bugs, this never materialised and a reversal on Friday has continued this week with price drifting back lower. Taking a longer term perspective the region from 1360-1375 has provided a ceiling for the last 4 years now and despite looking like the market is attempting to carve out a longer term bottom the market needs to break above there to make any significant gains.

After a major correction that happened two weeks ago WTI prices managed to return above the $60 handle. In spite of the bigger correction the net positioning remains extremely high thus the risk of the sharp correction prevails. However, in order to materialize this risk the favourable macroeconomic conditions must appear. Among such conditions one can name further increases in the oil inventories and US oil output. Today weekly API report is going to be published while tomorrow the EIA counterpart will take the stage. In case of the latter market consensus points for another increase of 1.3M. A technical overview of Oil.WTI can be found here.

 Fed minutes (Wednesday, 7pm GMT)

Minutes will reveal a discussion from the last meeting chaired by Janet Yellen. It’s important to remember that this meeting took place ahead of the market turmoil. Therefore investors will be eager to know if FOMC participants were closer to back a 3-rates hike scenario than they were in December. Recall that two members voted against a hike in December and minutes showed that some were worried about low inflation.