European Open: Crude & China still the drivers

Chinese data was slightly worse than expected but the markets aren’t as stressed.  The data overall still paints a picture of stabilisation although there is still no sign of recovery in Q4. Only trade data last week pointed to a rebound in import growth – one ray of sun amongst the clouds.  However, the market has evidently absorbed a good degree of negativity on China.  Fed officials largely downplayed external developments at the start of the year, dismissing the volatility to a greater extent than was the case last year, this might support US interest rate expectations.
Playing risk-off is becomming more consensus-like and not as easy. I still favour shorting WTI below 31 USD/bbl and Dax.
Looking forward: today‘s update of the monthly oil market report from the IEA merits attention. Yesterday’s monthly OPEC report pointed to 2016 as heralding the start of the rebalancing. IEA has historically been more bullish so today’s report could potentially play into the hands of dip-buyers.
In the UK, focus is on CPI inflation in December and on BoE governor Mark Carney. More and more analysts have begun to push their expectations for the first BoE hike from Q2 to Q4 as BoE seems less and less ‘Fed light’. Finally, German ZEW expectations for January are due today.
I’ll be actively looking to short GbpUsd on any further dovishness.

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