Wednesday 16th July 2008

The value of oil came off yesterday, at one point down by $10 a barrel after concerns were again expressed about the state of the US economy and that this in turn, would lower demand for crude. Bernanke’s speech warned of "downside risks" to growth and "upside risks" to inflation causing the volatility in the oil and equity markets as the Dow and FTSE both made large losses on the day. Yesterdays Retail Sales in the US saw a slight increase at 0.1% and if you strip out gasoline a decline of 0.5%. The US today sees CPI figures released expected to be around a 0.7% an increase to 4.5% year-on-year. We will also see the FOMC meeting minutes which, after Bernanke’s testimonies should not give much more away, other than the views of some of the more hawkish Fed presidents.

The EuroZone sees the HICP inflation indicator this morning and is expected to remain at 4% again down to commodity, energy and food prices rising. The medium term goal for the ECB is to keep inflation at or below 2% so could we see another rate hike next month, or is growth going to be the overriding factor here?

At home today not too much data, we have the Unemployment figures expected to be up slightly around 10,000 extra claimants. Gordon Brown is meeting with the Nigerian President today regarding their oil crisis. Another interesting article in the Telegraph today indicating a 40% chance of a 0.25% rate cut at the beginning of next month.

On the currencies:

Yesterday saw record highs for EUR/USD through to 1.6037 and cable got through the $2 for the first time since 1st July. There is speculation that the Greenback’s decline may be scuppered by the ECB as the strong Euro can have a negative effect on their overall economy. With offers at 1.5940 we may see EUR/USD struggle to get though this level but if it breaks the next resistance is 1.5980. Cable is still trading over $2 with support not much below at 1.9980.

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