FX market outlookPosted on Tuesday, November 29 2016 at 8:31 am GMT+0000
Oil rises on hopes of OPEC deal; loonie gains.
Trading during the Asian session was muted, with a slight risk off mood in the markets as investors awaited an OPEC meeting on Wednesday. Oil prices stabilized after rising yesterday on hopes of a deal to be struck to limit output levels.
Oil-linked currencies like the Canadian dollar strengthened as WTI oil rose above the $47 a barrel mark on Monday. Prices slid down to the mid – $46 a barrel level in Asia today. USDCAD consolidated losses near yesterday’s low of $1.3395 as the loonie gained strength.
Oil prices rose on reports that Iraq’s oil minister said Iran is willing to cooperate with OPEC to reach an agreement this week to cut production. However, a deal could be derailed by many factors. For one, Saudi Arabia will not cut output unless non-OPEC members like Russia (a large oil producer) agrees to make substantial cuts as well. Failure to reach a deal at the meeting in Vienna on Wednesday could result in a plunge in oil prices.
The dollar recovered some losses made against the yen and edged higher in Asia to rise back above the key 112 yen level from a session low of 111.61.
The euro clawed back some losses made against the dollar and rose above the key $1.0600 level in early Asian trading today. It is now struggling to hold above this level. The single currency has been weighed down recently by political risk in Europe. One immediate risk event will be Italy’s referendum on December 4 on constitutional reform. Another risk ahead lies in the elections in France. Meanwhile the ECB’s rate decision on December 8 will also be in focus as it could impact the euro.
Looking ahead to the rest of the day, the main focus will be on US data, particularly growth figures. The US economy grew at 2.9% in the third quarter, the fastest pace in two years. Data today are due to show that the initial GDP estimate is expected to be upwardly revised to 3%. Meanwhile, other US data will be released from the Case-Shiller US home price index.