Global Inflation Edging Higher, Fitch Downgrades Saudi Credit Rating

The Fitch ratings agency downgraded the sovereign credit rating for Saudi Arabia from AA to AA- and maintained its negative outlook on the economy. Justifying the downgrade, the ratings agency said that oil prices are expected to stay at $35 a barrel in 2016 and inch higher to $45 a barrel in 2017, thus having a negative impact on Saudi Arabia's fiscal and external balances. The downgrade makes it more expensive for Saudi Arabia to borrow money. The Saudi deficit soared to 14.80% of its GDP in 2015, compared to a 2.30% deficit in 2014, largely due to the decline in oil prices. Fitch's downgrade comes after Standard & Poors cut the kingdom’s rating in February from A+/A-1 to A-/A-2 while Moody's has put Saudi Arabia on its 'downgrade' watch list. Saudi and other major oil producing nations are expected to meet on April 17th in Doha to attempt to reach an agreement on freezing oil production to stabilize prices.

Retail sales numbers from the US for the month of March are scheduled to be released by the US census bureau today at 12:30 GMT. Expectations are for the headline print to stay flat, following 0.10% declines in February while the core retail sales is expected to rise 0.30%, up from 0.10% gains in February. The drag on the retail sales is expected to come with a larger than expected slump in auto sales. Yesterday it was reported that US import prices gained 0.20% in March, rising for the first time in nine months underlining the rebound in oil prices was pushing inflation higher in the US. The US dollar has been trading weaker over the past few weeks as investors question the strength of the US economy and the Fed’s intentions on future interest rate hikes. The Federal Reserve is scheduled to meet on April 27th where the Fed funds rate is expected to remain unchanged at 0.25% - 0.50%.