Powell and Negative Rates, UK GDP and Oil Inventories

14 may 2020

From the point of macroeconomic statistics, the main event of yesterday was the publication of data on GDP and industrial production in the UK. The data came out, of course, extremely weak, but better than predicted (industrial production in March fell by -4.2% m / m - with a forecast of -5.6%, and GDP for the first quarter fell by-2.0% q / q with a forecast of -2.6% q / q), which even provided some temporary support to the pound.

As for the Eurozone industrial production in March, the data also turned out to be disgusting, but slightly better than forecasts: -11.3% m / m while experts expect the figure to be -12.5%.

Overall the growth of the EURUSD and GBPUSD yesterday was more related with the general pressure on the dollar due to the expectation of the speech Jerome Powell (the head of the FED). The fact is that after extremely weak inflation data (US consumer inflation fell by a record 0.8% over the month) and another Trump's attack on the Fed (urged the Central Bank to lower the rates), Powell expected to provide comments on possible negative rates. But they were not followed. Accordingly, the danger for the dollar was over, and it was actively restoring in the foreign exchange market. The stock markets, on the contrary, got a reason to fix profits, which, in fact, was used.

Trump, meanwhile, continues to deny reality and insists on opening the US economy as soon as possible. Despite the fact that one of the main infectious disease specialists said at a Senate hearing on Tuesday that such a rush could lead to very serious consequences.

And a few words about the oil market. For the second week in a row, the news background was positive for oil buyers. Yesterday, official data on US oil inventories showed the first reduction in stocks over a fairly long period of time (since January 2020). Thus, the main fear of the oil market - the shortage of oil storage facilities and the inability to store newly produced oil automatically disappears. In this light, we recall our medium-term recommendation to buy oil, which was and continues to be an actual trading idea.