The oil price was under pressure again last week as OPEC’s extension of output cuts (rather than an incremental reduction) and US production hitting the highest level since August 2015 (with a record 20th straight weekly increase in rigs), weighed on sentiment. More generally, the pick-up in inflation, which started in the middle of last year, has abated in recent weeks (the Eurozone experienced deflation on a 1-month basis from April to May). This creates a quandary for central banks – whether to respond to better global growth or keep their foot on the throttle to bring price pressures closer to target.
We expect the ECB this week to sit somewhere in the middle – overall dovish, but with some adjustment to their language. We also have James Comey testifying to Congress regarding Trump’s involvement with Russia and the UK General Election on the same day as the ECB announcement (Thursday). Recent GBP weakness has priced a weakening in support for the Conservatives.DOWNLOAD THE FULL ARTICLE View All Global Market Updates