Loonie bulls are banking on an actual OPEC agreement to extend their output deal as Russia expressed its support for a nine-month extension.
- Empire State manufacturing index slid from +5.2 to -1.0 vs. +7.2 consensus
- U.S. NAHB housing market index climbed from 68 to 70
- Canadian existing home sales down 1.7% vs. projected 1.1% gain
- Saudi Arabia and Russia to back extension of output deal until March 2018
9-month oil output deal extension?
All eyes and ears are on remarks from energy ministers these days as traders are eager to find out what the “Black Crack mafia” could come up with to stop the bleeding in crude oil.
Word through the pipeline is that Saudi Arabia, which is the largest producer among the OPEC nations, and non-OPEC member Russia expressed their support for a potential extension of the current output deal. Leaders from these nations also mentioned that they hope other oil producers would cooperate to keep a lid on output until March 2018.
Energy ministers Khalid al-Falih and Alexander Novak stated that they are committed to “stabilising the global oil market, reducing volatility, and ensuring the balancing of supply and demand in the near and long term.” Both recommended that the output deal extension be implemented in the same terms as the current one, trimming total production by roughly 1.8 million barrels per day.
WTI crude oil jumped to $48.84/barrel upon hearing these remarks while Brent crude oil topped at $52.63/barrel before retreating to $51.82/barrel. Naysayers, however, think that these production cuts won’t be enough to stop the oil decline as U.S. oil rigs have been ramping up operations.
U.S. data disappointment
Fans of the dollar are starting to have doubts about a June Fed rate hike again as the recent set of data turned out weaker than expected.
In particular, the Empire State manufacturing index posted a surprise drop from +5.2 to -1.0 to reflect industry contraction instead of improving to the projected +7.0 figure. Components of the report indicated that the tumble was due to a slump in new orders and shipments even as the employment index ticked slightly higher.
Major Market Movers:
The Loonie was able to chalk up some wins against its peers, buoyed by the quick bounce in crude oil on talks of an output deal extension. However, the Canadian currency gave back its wins on signs of weakness in the housing sector.
USD/CAD dipped to a low of 1.3583 then climbed back up to 1.3670, CAD/JPY popped up to a high of 83.50, EUR/CAD found resistance around 1.0500 then retreated to 1.4965, and GBP/CAD is down to 1.7585.
Watch Out For:
- 2:30 am GMT: RBA meeting minutes (Review their latest rate statement here!)
- 5:30 am GMT: Japanese tertiary industry activity index (0.1% expected, 0.2% previous)