Daily Market Report - 22/01/2016


Yesterday noted economist Martin Weale stated that one rate hike by the BoE will not necessarily be followed by another rate hike in swift succession and that oil prices have had a big impact on inflation and most importantly wage growth. Weale mentioned that right now although unemployment has decreased, there are a lot more people working part-time than ever before. 


Interest rates in the Eurozone yesterday were left unchanged with the interest rate at 0.05% and the overnight deposit rate again left unchanged at -0.3%. Mario Draghi said rates would stay at present or lower levels for an extended period and there would be no limits to action to reflate the Eurozone. He went on to say they have the power, willingness and determination to act and will do so willingly if need be. He would not rule out again putting in place an expansionary monetary policy to help the Eurozone economy at the next meeting in March.

Again, the recent fall in oil prices is what is being sighted as the biggest cause for concern for the ECB and all central banks. In December when Draghi threw a massive curveball out there and said the Eurozone economy was performing well, he expected inflation to read 1% in 2016. However that forecast was generated on the assumption that oil prices would average more than $50 a barrel but now its at $30 a barrel. 


Yesterday manufacturing activity contracted less than expected in January according to the latest survey from the Philadelphia Federal Reserve. The Philly Fed manufacturing index came in at -3.5, better than expected and up from last month's -10.2 reading. Expectations were for the report to come in at -5.9.

The report's reading on future expectations, however, continued to decline and is now at the lowest levels since November 2012. January's special question to survey respondents was about energy prices and the impact they are and will have on business activity, with most firms responding that the net effects have been positive, .

Key Announcements

15:00 – USD – US Markit manufacturing PMI (Jan) expected to come out at 51.2