Oil prices staged a strong rebound yesterday amid better-than-expected economic data from China, the US and Germany. Also sending prices higher were escalated tensions in Iran. The front-month contract for WTI crude oil soared to 101.01 before settling at 100.71, up +2.04%, while the equivalent Brent crude contract initially climbed to a 3-day high of 112.78 before ending the day at 111.53, up +0.17%. The BOC left the overnight rate unchanged at 1% but forecasting global economy would grow at a more modest pace.

Confidence in the Eurozone improved as the new year begins. The ZEW economic sentiment for the 17-nation region improved to -32.5 in January from -54.1 a month ago. This had also beaten consensus of -48.7. Concerning Germany, the biggest economy in the Eurozone, alone, economic sentiment rose to -21.6 in January, compared with market expectations of -49.2, from -53.8 in the prior month. Current situation sentiment also climbed higher to 28.4 from 26.8 in December. The market had anticipated a drop to 24.

In the US, the Empire State manufacturing index surprisingly improved to 13.5 in January from 9.53 a month ago. The market had expected a more modest rise to 10.5. The US will report PPI, industrial production and housing market data today. Headline PPI probably eased significantly to +2.8% y/y in December from +5.7% a month ago. Core PPI is expected to have moderated to +0.1% from +2.9% in November. Industrial production probably gained +0.5% m/m in Decmeber, following a -0.2% dip in November. The NAHB hosing market index might have edged +1 point higher to 22 in January.

The BOC expectedly paused in January, keeping the overnight rate at 1% for an 11th consecutive meeting. While policymakers believed economic growth will be 'more modest' than previously anticipated, they preferred to stand on the sideline for the time being as historically low interest rates and the well-functioning financial system have been providing stimulus to the economy. Yet, the central bank pledged to monitor the market situation carefully so that it could act swiftly with the aim of keeping inflation at the 2% target in the medium-term.

Besides encouraging economic data, oil prices were pushed higher amid intensified tensions over Iran. France is pushing for an earlier embargo against Iran, suggesting that the delay should be no more than 3 months. At the same time, Iran warned that Saudi Arabia should be 'wise and responsible in their approach' regarding the country's claim to substitute oil supply lost in Iran.