Julius Baer: Comentarios Reino Unido y Petróleo

Redacción - Miercoles, 17 de Enero

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ECONOMICS United Kingdom: Brexit inflation burst begins to fade, BoE to become more relaxed The December 2017 consumer price index (CPI) data, presented yesterday for the United Kingdom (UK), showed that headline CPI inflation retreated from the November high of 3.1% (all figures year-on-year) back to 3.0%. Similarly, core CPI (excluding energy and food prices) edged down to 2.5% from 2.6%. The data shows that the base effect of the surge of inflation, which began after the Brexit referendum in 2016, and slammed down pound, is now receding. Import prices now notch 4.8%, considerably lower than the values beyond 10% reported in the first months of 2017. Also input prices are considerably lower than at the beginning of 2017. However, the effects of pound weakness will take more time to be worked off. Hence, the combination of high inflation with lower wage growth will likely remain throughout 2018. This means that consumers remain under pressure from negative real wage growth. Nevertheless, with indications that the worst of the inflation overshoot will eventually be over, the Bank of England (BoE) is expected to become more relaxed regarding pound weakness. We continue to believe that further rate hikes this year are unlikely, as battling inflation with higher rates while consumers’ wallets become more challenged, would be the wrong cure to offer at this time.

Receding inflation reduces the dilemma of the BoE whether to prevent pound depreciation with more rate hikes, while consumers face negative real wages. We stick to our scenario that the BoE will hold as long as Brexit causes uncertainties and tolerate a weaker pound.

 

David A. Meier, Economist, Julius Baer

 

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COMMODITIES

 

Oil: Flirting with USD 70 per barrel

 

Oil prices slid more than 1% yesterday, taking a respite from the past weeks’ swift rally, unable to lastingly settle above USD 70 per barrel. The bullish market mood and technical momentum remains solidly in place. Hedge fund and other investor calls on rising prices have reached unchartered territory and it is now a question of when rather than if profit-taking will occur. Sentiment tends to swing in short-term cycles, with a few months only between bearish troughs and bullish peaks. However, timing the turning points has been a very difficult exercise in our experience. Fundamentally, today’s price levels project too rosy a picture. Indeed, the solid economy and strong demand have been tightening global oil supplies. But we believe that this trend is set to slow and reverse later this year. Output growth from US shale basins, Canadian oil sands and Brazilian deep water platforms should more than match projected global demand growth. The latest official data sees US shale production growing at a healthy rate above 0.1 million barrels per day this month, underpinning the projections of above 1.0 million barrels per day growth from 2017 to 2018. Moreover, with the market rebalancing progressing well, the petro-nations’ supply deal might end mid-year, not least as Russian oil producers are willing to bring new projects into operation. We stick to our cautious view on oil.

 

Oil flirts with USD 70 per barrel as prices so far are unable to lastingly settle above this level. The bullish mood remains solidly in place with hedge fund futures positions at unchartered territory. We believe that today’s oil prices project too rosy a picture; we stick to our cautious view and see the market at risk from profit-taking.

 

Norbert Rücker, Head Macro & Commodity Research, Julius Baer

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