Today is all about oil prices, which were particularly nervous yesterday ahead of the today’s formal meeting of OPEC members in Vienna. The desire to cut production appears to be there, but it’s all about how it is delivered, with some members more flexible than others. The oil price will remain volatile on this last day of the month. Talk is that they want to freeze production around 32.5m to 33m barrels per day. If we see something towards the lower end or below that range, then oil prices will rise as a result.
Beyond oil, it’s about the correction we’ve seen on the dollar. The factors that have pinned its rally largely remain in place, but it’s not surprising that we’re seeing some correction given the extent of one-way traffic on the currency. So far today we’ve seen a fairly steady tone emerge during the Asia session, the dollar index marginally firmer after what has been four days of corrective activity. Attention is turning more strongly to the euro ahead of the weekend referendum in Italy on constitutional reform, which could see greater political instability emerge in the coming days and weeks should the Italian PM not get his way. The result is priced in to a fair degree, so the single currency is not going to fall out of bed as a result, but it has the potential to eat away at sentiment over the coming weeks. Before then, it’s Friday’s US jobs numbers that are the main focus, but volatility potential is lowered by the fact that a December rate hike is priced in and it’s expectation on fiscal policy that have been driving the dollar higher.