U.S. Session Forex Recap – Nov. 29, 2016

  • OPEC technical talks: No agreement on output deal details
  • OPEC: Iran and Iraq still hesitant to cooperate in output cut
  • Iran oil minister: Meeting will be fruitful if not driven by political rivalries
  • Iraq oil minister: Will participate in an OPEC agreement that is acceptable to all
  • Draghi: Geopolitical risks to bring uncertainty in the next few months

All eyes and ears were on OPEC officials as market watchers tried to look for clues on whether or not the cartel can come up with an output deal in this week’s meeting.

Major Events:

OPEC chatter – Reports confirmed that the technical talks among OPEC experts last week ended without any agreement on the deets of an output deal, which isn’t exactly a good omen for the upcoming OPEC gathering in Vienna on November 30. Sources said that Iran and Iraq are still hesitant to cooperate in an output cut, although Iran’s oil minister said that the official meeting can be fruitful if not driven by political rivalries while Iraq’s oil minister mentioned that they will participate in a deal that is acceptable to all.

Keep in mind that Iran has been ramping up oil production in order to make up for their lost revenues when the Western sanctions were still in place, but its rivals don’t seem willing to give up any more of their market share. Meanwhile, Iraq needs to profit from increased oil output in order to fund its war with the Islamic State, and its thumbs up for an output deal could hinge on Iran’s participation. In any case, better brace yourselves for an eventful OPEC pow wow this week!

ECB head Draghi’s speech – Governor Draghi had a couple of speeches yesterday, both reiterating that geopolitical risks could bring a lot of uncertainty to the table in the coming months. This was already evident earlier this year, thanks to the EU referendum and the U.S. elections, but these may just be the tip of the iceberg.

For one, Italy has an upcoming referendum over the weekend and anti-establishment vibes are running high, which could mean a victory for the “No” camp or those who want to see constitutional reform. Prime Minister Renzi has declared that he would step down if the “No” votes win, further threatening the political stability in Italy and fueling speculations of an EU exit.

To add to that, France has its general elections coming up in the second quarter of 2017 and the primaries are also reflecting the rise in populist sentiment, also causing some whispers of a French exit from the bloc. And of course, we’ve got Brexit negotiations likely to start in the first quarter of next year. Exciting times!

ECB Governor Draghi emphasized that they should continue to strengthen the single market in order to preserve financial stability especially since they don’t want to return to crisis mode. He also admitted that the U.S. economy is recovering at a much faster pace than the euro zone and that they will study their options in December to see if they need to make adjustments in order to boost inflation.

Major Market Movers:

EUR –  The euro was the weakest performer during the U.S. session as Draghi’s warnings reminded traders that the region might be in for a political shakeup.

EUR/USD slipped from 1.0632 to a low of 1.0563 (-0.65%), EUR/JPY retreated from 119.28 to 118.97 (-0.26%), EUR/AUD dropped from 1.4221 to a low of 1.4137 (-0.59%), and EUR/NZD dipped to 1.5000.

CAD The oil-related Loonie had its share of volatility but ended mostly higher with positive expectations for the OPEC meeting still in play.

USD/CAD fell from 1.3490 to 1.3400 (-0.68%), CAD/JPY advanced from 83.28 to a high of 84.06 (-0.93%), EUR/CAD is down from 1.4305 to 1.4169 (-0.95%), and GBP/CAD tumbled from 1.6752 to 1.6630 (-0.78%).

Watch Out For:

  • 12:00 am GMT: Australia HIA new home sales

See also:

London Session Recap

Asian Session Recap

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