U.S. Session Forex Recap – Dec. 1, 2016

  • OPEC nations to lower total output to 32.5 million barrels per day
  • OPEC output deal to take effect for six months starting January
  • Iran to freeze production at 3.795 million barrels per day
  • Russia pledged to cut production by 300K barrels per day
  • ADP non-farm employment change at 216K vs. 161K consensus
  • U.S. core PCE price index at 0.1% as expected
  • U.S. personal spending up 0.3% vs. 0.5% forecast
  • U.S. personal income up 0.6% vs. 0.4% forecast
  • U.S. pending home sales posted 0.1% uptick vs. projected 0.3% gain
  • Chicago PMI jumped from 50.6 to 57.6 in Nov
  • U.S. crude oil inventories down 0.9 million barrels
  • Canadian economy grew 0.3% in Sept vs. 0.1% forecast

Surprise, surprise! OPEC officials decided to put their differences aside and shake hands on its first production cut in eight years.

Major Events:

OPEC decision – After weeks of playing hardball, members of the oil cartel agreed that they needed to lower their total output by 1.2 million barrels per day to 32.5 million barrels per day for six months starting in January. Libya and Nigeria are exempted from production cuts while Iran got its wish to set production at 3.795 million barrels per day, higher than the proposed 3.707 million barrels per day.

Saudi Arabia will be pumping out 486,000 fewer barrels per day while UAE and Kuwait will be reducing output by 139,000 and 131,000 barrels per day, respectively. Iraq, even though it also lobbied for special treatment to take advantage of larger oil revenues in funding its war with the Islamic State, will slash output by 210,000 barrels per day. And even though Russia isn’t exactly part of the OPEC gang, it also joined in the team effort and pledged to cut output by 300K barrels per day.

WTI crude oil popped up to $49.86/barrel upon hearing the news but retreated to $49.19/barrel soon after. Brent crude oil rallied to $52.30/barrel then slid to $51.48/barrel. In other oil-related news, U.S. oil stockpiles as reported by the Energy Information Administration fell by 0.9 million barrels instead of rising by 0.7 million barrels, easing oversupply concerns.

Mostly upbeat U.S. data – Economic releases took a backseat to the OPEC headlines, but it’s worth noting how the latest batch of reports from Uncle Sam turned out. The ADP non-farm employment change reading, which is sometimes considered a preview of the NFP report, printed a stronger than expected 216K increase compared to the 161K consensus.

The core PCE price index, which is rumored to be the Fed’s preferred inflation gauge, came in at 0.1% as expected. Personal income rose 0.6% versus the projected 0.4% uptick but personal spending missed the mark with a 0.3% increase versus the estimated 0.5% rise. Pending home sales also came short of consensus with a meager 0.1% uptick while Chicago PMI surged from 50.6 to 57.6, outpacing the estimate at 52.1.

Major Market Movers:

CAD – Since the Canadian dollar is positively-correlated to crude oil, the currency had a bullish reaction to the OPEC’s decision to cut production and stabilize the market.

USD/CAD fell to a low of 1.3355 but rallied back up to a high of 1.3463, CAD/JPY zoomed up from 84.24 to 85.48, EUR/CAD tumbled from 1.4289 to 1.4191, and AUD/CAD fell from 1.0008 to .9915.

Watch Out For:

  • 12:30 am GMT: Australia private capital expenditure q/q (-2.8% expected, -5.4% previous)
  • 12:30 am GMT: Japanese final manufacturing PMI (no revisions from initial 51.1 figure expected)
  • 1:00 am GMT: Chinese official manufacturing PMI (51.0 expected, 51.2 previous)
  • 1:00 am GMT: Chinese official non-manu PMI (54.0 previous)
  • 1:45 am GMT: Chinese Caixin manufacturing PMI (50.9 expected, 52.2 previous)

See also:

London Session Recap

Asian Session Recap

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