The main event this week is Federal Reserve Chair’s testimony before Congress. Her opening remarks yesterday struck a hawkish tone on the economy and markets sentiment on a third 0.25% rate rise in 2017, possibly in March, has risen to a projected likelihood of 34%. That had dropped to 24% in January after data demonstrated a slide in average hourly earnings and 30% before her comments yesterday.
Stock markets rose on Wall Street yesterday, positivity given a new boost and the dollar index also strengthened 0.2%, which led to oil and gold prices dipping. This morning Brent crude was down 14 cents a barrel to $55.83 as markets opened in London, 0.23% drop. WTI had a slightly sharper slide, down 23 cents, or 0.43%, to $52.97 a barrel.
Additional pressure was brought to bear on oil prices after a BMI Research report indicated that while OPEC compliance with supply cut commitments was at almost 93%, Iraq was only demonstrating 40% compliance. The research agency posited that Saudi Arabia-driven cuts, the de-facto OPEC leader has overcompensated, may not prove sustainable and that Iraq letting the side down could prove damaging to group cohesion. If present compliance levels are to be maintained or improved upon it will mean other OPEC members having to deepen their own cuts to compensate for Iraq, unless they can be pressurised into further compliance.
Analysts at U.S. bank Citi have reacted to limited evidence of the pace of reductions in global oil supplies by lowering their 2018 Q2 and Q4 oil price forecasts by $1 a barrel.
Gold prices also slid on dollar strength and market optimism, with spot gold down 0.2% to $1225.96 oz. A majority of market analysts think that gold prices will now consolidate after a strong start to the year, the commodity gained over 5% in January on geopolitical concerns. However, quoted by Reuters, Richard Xu, fund manager at HuaAn Gold, the biggest gold ETF in China, still thinks gold will see a new rally later in the year.