Markets never have great expectations going into OPEC meetings, but yesterday’s agreement to cut production starting January of next year came as a surprise. Of course, we knew that was the way that the traffic was headed, but there was no guarantee that it was going to arrive there this week. We’ve seen Brent back above the USD 50pb level, whilst the energy related stocks have also risen, by as much as 5% in some cases. The question is whether this is going to put a floor under the oil price from here. The answer to that could well like with what happens with the global economy in the coming year.
Before then, we have jobs data in the US tomorrow. With a December tightening from the Fed now fully priced in, the volatility of the dollar to this number could well be less than usual. Markets are looking for a 180k gain in headline payrolls, with the rate holding steady at 4.9%. As mentioned yesterday, expectation of fiscal policy under the new administration has been the main driver of the dollar and Fed expectation over the past three weeks, with the current state of the economy coming a distant second.
The euro is the currency in focus over the weekend, with Italy’s constitutional referendum taking place. Polls suggest that Renzi’s desire to streamline the parliamentary system and reduce the power of the regions will be rejected, but after Brexit and Trump, markets are less keen on relying on polls. This is not an equivalent moment in terms of potential market impact, which is more concentrated on whether the PM will survive or another election is called.