Britain Balances Carefully Amid Strong Headwinds

Daily Analysis - 12/09/2016

Latest Data Indicated a Mixed Near-Term Outlook


Britain is experiencing lower exports and slightly lower imports, though their trade balance deficit is not as wide as recent months. Policymakers take the temperature of their economy in these past post-Brexit months to determine a proper schedule for accommodation and employment of Article 50.

Trade Balance Teeters in UK

Britain’s trade balance mitigated some of its deficit during the month of July, as reported by the Office of National Statistics. Weakness in the local currency evidently reflected on demand for exported products while in the meantime imports declined as well. Trade values were reported at -£11.76 billion, missing only slightly expectations of -£11.75 billion and leaving behind June’s deeper deficit of -£12.92 billion. The positive economic indications recently released by the UK have helped to lift up the pound while Article 50 has not yet been triggered.


Oil Rig Counts Increasing

On the heels of rising demand for oil in the US, West Texas Intermediate peaked at $47.73 once the government released a massive amount of oil stock from its inventories. Baker Hughes rig counts reported an increase for the week ending on the 3rd of September, a number that could have oil prices retrace as tropical storms and Hurricane Hermine have kept imported oil supplies from coming in. Rigs were reported at 414 from 407, rising at a gradual pace after having dropped to lows of 316 in mid-March. During the G20 meetings Saudi Arabia and Russia agreed to form a new task force to monitor the price of oil and stabilize prices.


Cornerstone Fundamentals Weaken in Canada

Canadian unemployment edged up in August, climbing to 7.00%, continuing is light ascent from the previous month’s 6.90% while missing expectations of remaining static. As the Bank of Canada opted to leave monetary policy unchanged recently, rising unemployment may blur the image for forecasted growth rates. Adding further to the doldrums is the relatively strong Canadian dollar that is also decelerating the economy amid low oil prices - spurring Gross Domestic Product to negative values over the second quarter.


Japan Too Accommodative

Yearly producer prices in Japan were reported to have slightly advanced on a yearly basis up until August. The Bank of Japan reported annual figures of -3.60%, rising from previous months’ -3.90% but missing only by a hair estimates of -3.50%. The recent producer price data, an early indication of how consumer prices are expected to behave in the coming months may lift off some pressure for the BoJ as it regards the effects of long standing negative rates. Nevertheless, bank officials have reiterated that the inflation mandate of 2.00% must be achieved in order to help Japan avoid the economic depression. The central bank convenes on the 21st of September, where further easing is a possibility.


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