From the FXWW Chatroom: It was all about the OPEC overnight, and OPEC representatives confounded the sceptics after reaching a landmark deal to reduce oil output. The OPEC said that it would cut production by 1.2 million barrels a day from 33.6 million barrels and said it expects producers from outside the group, including Russia, to join with additional cuts totaling 600,000 barrels a day. The OPEC cuts were deeper than many had expected, amounting to about 1% of global production. The 14 member group hopes the output cuts will help shrink a supply glut that has been fed in part by the US shale boom, and has depressed oil prices for more than two years.
Crude benchmarks have rallied strongly on the news – both Brent and WTI are up over 8%. The inflationary impact of higher crude prices combined with a solid US data flow overnight has combined to weaken the Treasury market, with 10-year yields up around 9bps to 2.38%. US equities ended a mixed bag, perhaps partly reacting to President-elect Trump’s announcement of former Goldman-Sachs banker Steven Mnuchin as his nominee for Treasury Secretary. The US dollar got a lift from the betterthan-expected ADP payrolls print – which came in at +216k for November, versus the revised +119k increase in October, well above expectations for a +170k result. [UOB]
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