May says no to soft Brexit

10 January, 2017

Oil production
Crude oil prices started the week on a sour note, due to the increase in oil supplies from Iran, while the comeback of the US shale oil producers casts a dark cloud on early market rebalance, whittling away the OPEC-agreement euphoria.

On Friday, the Baker Hughes ‘rig count’ report showed that 4 more oil rigs were set in motion last week, rising to a 529 total count, and erasing the two-year decline in US shale drilling capacities.  WTI Futures for the February settlement trades at 53.03 per barrel, -1.78% lower session opening. Brent benchmark fell 1.82%, stalling near an area of $56 per barrel.
Iran, who is excluded from the OPEC agreement, sold more than 13 million barrels of oil stored in tankers offshore in order to restore the market share and attract new customers.

EU on the recovery track

The volume of industrial production in Germany in November 2016 increased by 0.4% compared with October, when its growth was 0.5%, according to the Ministry of Economics and Labour. Analysts expected an increase of 0.6%, but that did not happen. Increased industrial production in November 2015 was 2.2% with a growth forecast of 1.9%. German trade balance rose faster than expected to 22.6B despite the projected 20.3B.

Chinese reforms

Stock indices in China started the week successfully thanks to the shares of defence sectors, while the state-owned enterprises pondered over the plans of a mixed ownership reform. The index of the largest companies CSI300, listed in Shanghai and Shenzhen, rose 0.5% to 3.363,90 points, the index Shanghai Composite also rose by 0.5% to 3.171,24 points. The reform of state-owned companies in the recent weeks has become a catalyst for growth because China has pledged to promote the reform of mixed ownerships in the key sectors, including aviation, defence, oil and telecommunications, hinting of a loosened control over them.

The United Kingdom

The UK Prime Minister Theresa May said in an interview on Sunday that the government will take full control over immigration, trade, defence and other key sectors, even if their cost is going to be the access to the EU single trade market. Thus, the country’s leader ruled out the possibility of a trade-off with the bloc or saving any membership ties to all-new partnership relationships. The National currency lost ground on the bearish news, as the fraying ties with EU bring more uncertainty for investors and businesses, what is traditional to signal an increased safety plays and a bearish signal for speculators. GBP/USD fell by 1% to 1.2170, retracing from 1.2150 November 2016 support level.

Other Forex majors

The US Dollar stages moderate comebacks after a mixed NFP data, as December jobs growth fell short of forecasts while the wages grew faster than projected.  The Dollar index trades +0.17% higher at 102.34 with the biggest contribution seen from the Pound. Euro fell 0.09% against the greenback, as the Japanese Yen rose to a premium due to the increased risk-on plays, rising 0.27%. The offshore Yuan fell 0.34% against the US Dollar, as Chinese government suggested to loosen capital controls along with an easing access for investors.

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