Today marks the first Monday in 2016 where we’ve seen gains for Asian indices and this is due to rub off on European markets that are looking to add to the bounce from the end of last week. The risk appetite has been seen markedly in commodity markets where crude prices are enjoying their biggest two day rally in seven years with Brent and Nymex firmly back above the $30 a barrel mark. This is causing a considerable squeeze on the short sellers and there could be further strength to come as we are pressing the 20% mark of gains from last week’s lows, which as we know only too well from the calls of now being in an equity bear market following declines of 20% from their highs, that it is a signal that we are now back in a bull market for crude. Many are rushing to adjust upwards their forecasts for the price of oil especially since the commodity bear market has been ongoing for a year and a half now, in some cases longer if you consider some of the softs. Despite this strong bounce we are still down around 15% on the year for crude prices so it’s too early to say the worst is over for the commodity complex.
The bounce in oil has allowed some of the dollar majors to recover in particular GBPUSD which has visited levels above 1.4300 briefly overnight and if we see a continued rebound in commodities, further dollar weakness could allow cable to have another run at the 1.4500 level. The economic calendar is quiet today with just the German Ifo survey due for release and expected to soften, but the week becomes much busier with the FOMC on Wednesday and BOJ on Friday.