OPEC stalls and loonie falls

December 7, 2018

GBP. Sterling remains on hold in anticipation of next week’s vote. Yesterday, Chancellor of the Exchequer, Phillip Hammond, reiterated to Parliament that the proposed Brexit deal cannot be renegotiated and stood in line with May’s “my deal or no deal” stance. This was largely expected by markets and saw them shrug off the same comments heard from the government over the last few weeks. Twitter was awash with rumours that an emergency Cabinet meeting took place, but eventually, it was realised that this was just to update them on the progress in the commons. The data calendar remains light for sterling today.

EUR. The euro clawed back some ground against the dollar yesterday but remains suppressed due to political uncertainty and lacklustre data releases. This morning, however, the data calendar is filled with Eurozone data, with the most notable release being the final reading of Q3’s Gross Domestic Product. The market consensus suggests that there will be no revisions from the 1.7% level. Today, Angela Merkel steps down as leader of the CDU party but is expected to remain chancellor until 2021.

USD. Yesterday, the dollar posted minor losses against its G10 counterpart after the arrest of Huawei CFO prompted safe-haven flows into JPY, as risks to the US-China truce built. Markets also keenly eyed the OPEC meeting with the dollar finding some strength in lower oil prices. Today, the highly anticipated Nonfarm Payrolls is released where an uptick in wage growth may see the dollar track up to its recent highs.

CAD. The loonie cracked a fresh 18-month low yesterday after rumbles from OPEC suggested that the proposed production cut would be less than the market deems sufficient to soak up the glut in supply. With Iran holding up the official announcement, the oil market continued to sell-off. The final number may be released today after OPEC meet with Russia. Any production cut greater than 1million barrels per day, as suggested by Saudi Energy Minister yesterday, will see crude markets rally and will likely see the loonie post some much-needed gains.

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