Weekly Market Outlook: OPEC+ and Nonfarm Payroll in Focus
Last week’s focus was on the Bank of England’s (BoE) Thursday meeting and its subsequent interest rate decision.
The BoE poured cold water on speculation that UK interest rates could be raised as early as next year by adopting more of a “wait and see” approach. This more cautious attitude sparked a two-day downtrend in the GBPUSD, although on Monday morning the pair had regained some upwards momentum, passing above the 1.3900 level.
This week, our main focus switches to the other side of the Atlantic and Friday’s monthly release of the nonfarm payroll data in the US.
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Weekly Forex Calendar
Depicted: Admirals Economic Calendar
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OPEC+ to Discuss August Supply
Before considering Friday's release of updated employment data in the US, we firstly turn our attention to crude oil and Thursday’s OPEC+ meeting.
This meeting takes place amidst the expected resumption of negotiations between the US and Iran regarding the revival of a nuclear deal - the successful outcome of which would see the relaxation of US sanctions against the OPEC member.
Oil prices have risen for five consecutive weeks, as fuel demand grows due to strong economic recovery and an increase in travel for summer in the northern hemisphere.
OPEC+ is currently producing 2.1 million barrels per day (bpd) from May to the end of July as they continue to ease last year’s huge supply cuts. At Thursday’s meeting, August supply will be discussed, with some analysts anticipating a rise of up to 500,000 bpd in order to keep up with growing demand.
Depicted: Admirals MetaTrader 5 – Brent Crude Oil Daily Chart. Date Range: 30 April 2020 – 28 June 2021. Date Captured: 28 June 2021. Past performance is not a reliable indicator for future results.
Past five-year performance of Brent crude:
- 2020: -23.01%
- 2019: +27.37%
- 2018: -21.36%
- 2017: +19.70%
- 2016: +47.20%
Oil prices fell early on Monday morning, but quickly recovered and continued to trade above the 50-day moving average.
Despite the cause for optimism due to growing oil demand, investors will be wary of the increasing spread of the Delta variant of the COVID-19 virus, as infections soar across countries such as Australia – who have gone back into lockdown in various parts of the country to curb further spread of this more infectious variant.
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Trader’s Radar - Nonfarm Payroll Release
Last week on Friday, the Federal Reserve released the US personal consumption expenditures price index – its favoured indicator for inflation.
The 0.5% increase was less than the expected 0.6%, which did alleviate any concerns that inflation was out of control. However, the year-on-year rise of the index was 3.4% - the highest level seen since 1992 – leaving an element of caution in the markets that the Fed may be forced to raise interest rates sooner than expected.
On Friday, Eric Rosengren – President of the Federal Reserve Bank of Boston, stated that it is possible the Fed’s criteria for an interest rate hike could be met by the end of 2022.
He further elaborated that the criteria for a rate hike are “that we have a sustainable inflation rate ... and that we’re at full employment”.
These comments add increased significance to Friday’s nonfarm payroll data, which is expected to reveal an increase of 675,000 jobs. However, over the last couple of months the payroll data has seen reality fall short of expectation.
The updated figures will provide further insight into how long the labour market will take to fully recover from the COVID-19 pandemic. Another month of disappointing results is likely to lead to a reversal of June’s gains in the USD.
Regardless of the final figures, we can expect to see a significant increase in volatility for currency pairs including the USD around the time of the payroll data’s release on Friday.
Depicted: Admirals MetaTrader 5 – US Dollar Index Daily Chart. Date Range: 1 May 2020 – 28 June 2021. Date Captured: 28 June 2021. Past performance is not a reliable indicator for future results.
Past five-year performance of the US dollar index:
- 2020: -6.76%
- 2019: +0.36%
- 2018: +4.19%
- 2017: -9.75%
- 2016: +3.65%
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