US equities closed roughly flat after a choppy session which saw energy the main cause for the volatility as crude continue to slide lower. The DJIA lost 0.08%, the S&P 500 lost 0.07% and the NASDAQ-100 finished down 0.32%. Economic data out of the US yesterday were slightly positive with JOLTS Job Openings (5607 vs 5413) and Wholesales Inventories (-0.1% vs 0.2%) beating expectations.

Fed Chairman Yellen takes centre stage today and tomorrow as she delivers her semi-annual testimony to the House Financial Service Committee. The testimony is due at 15:00 GMT, with the text of the testimony to be releases at 13:30 GMT. Yellen is expected to adopt a more dovish outlook than in her previous communications, which risks being seen as ultra-dovish by markets which are still pricing in a more hawkish FED. A more hawkish than expect tone will see the USD strengthen broadly as US equities take a beating on further rate hike expectations.


ECB`s Weidmann stated that he expected inflation to increase later than previously expected while ECB`s Villeroy said that monetary policy should not be the only tools used to support the economy. JPMorgan announced their dovish outlook for the ECB in which they expect the ECB to cut the deposit rate to -.5% in March and -0.7% in April. The market did not however echo either of the dovish statements as the EUR continue to breach higher in yesterday’s trade on the back of increased risk aversion creeping into the market. News out of the EURO ZONE is light today with only the French and Italian Industrial Production m/m expected at 0.2% and 0.3% respectively.


The GBP was muted in yesterday’s trade as UK Trade Balance for Dec could not beat expectations and printed -2709 vs the expected -3000. Today sees the all-important Manufacturing Production m/m (expected at 0.0%) taking centre stage, which can help the GBP recover some ground should expectations be beaten.


WTI crude futures rose overnight thanks to a slightly softer USD and API Crude figures which showed that inventory build ups were at 2.4m vs the expected 3.6m, and below today's Department of Energies expected build of 2.85mln. Rumours regarding oil producing nations continue, with IRAN stated to have reached out to Saudi Arabia in regards to current conditions in the oil market. Whilst Kuwait is rumoured to be preparing to increase their oil production by 150k bpd.

Commerzbank forecasts the average Brent prices to be at $42 and the average WTI to be around $41 through 2016. Whist the US Energy Information Administration reduced their forecasts for 2016 to 37.59 and 37.52 for WTI and Brent respectively.