Crude Oil drops on OPEC, China concerns, ignores softer US Dollar

Markets remain indecisive on early Thursday as the Thanksgiving Holiday joins mixed risk headlines. That said, the concerns about witnessing easy inflation in major economies and rate cuts from the top-tier central banks seem to underpin the cautious optimism and weigh on the US Dollar. However, news about the severe pneumonia outbreak in China prods the market’s optimism.

With this, the US Dollar prints the first daily loss in three and helps the riskier assets like commodities and Antipodeans to pare the previous losses. However, Crude oil fails to cheer the Greenback’s weakness and remains pressured amid the price-negative news about China and OPEC.

That said, the Gold Price reverses the previous day’s retreat from the monthly high whereas BTCUSD and ETHUSD pare the previous day’s heavy gains with sluggish moves. Further, the US stock futures remain lackluster despite the upbeat closing of the Wall Street benchmarks whereas the Asia-Pacific shares edge higher.

It should be noted that AUDUSD ignores the mixed mood and China data, as well as the disappointing PMIs at home, to jump the most among the G10 currency pairs. Alternatively, GBPUSD and USDCHF appear mostly unchanged as traders await the preliminary PMIs for November.

Following are the latest moves of the key assets:

• Brent oil drops for the second consecutive day, to $81.30 by the press time.
• Gold price recovers to $1,996 after reversing from a three-week high the previous day.
• USD Index snaps two-day winning streak, down 0.20% intraday near 103.65 at the latest.
• Wall Street closed with mild gains and the Asia-Pacific stocks edged higher. That said, equities in Europe and the UK begin the day with mild losses.
• BTCUSD and ETHUSD both reverse the previous day’s gains to around $37,300 and $2,070 at the latest.

Crude Oil eases ahead of PMIs…

Oil prices drop for the second consecutive day as a heavy weekly inventory build joins the postponement of the OPEC meeting from November 26 to 30, as well as due to the chatters suggesting the OPEC technical panel, also known as the Economic Commission Board, was given a bearish outlook for the oil market.

Elsewhere, the first readings of Australia’s preliminary PMI for November came in disappointing as the Manufacturing PMI lowest since May 2020 while the Services counterpart slumped to the lowest since September 2021.

That said, JP Morgan cited the odds of cooling inflation and rate cuts from the major central banks and helped improve the sentiment, which in turn weighed on the US Dollar. On the other hand, news that the World Health Organization (WHO) has officially requested that China provide detailed information on the severe pneumonia outbreak that floods hospitals in two cities prods the market’s optimism despite Thanksgiving holiday-inflicted market inaction.

On Wednesday, US Durable Goods Orders for October challenged the US Dollar bulls with -5.4% outcome versus -3.1% expected and +4.6% prior readings but the Initial Jobless Claims dropped to a five-week low of 209K versus 226K expected and 233K prior. Further, the final readings of the University of Michigan (UoM) Consumer Sentiment for November came in as 61.3 versus 60.4 initial estimate. Additionally, the Atlanta Fed's GDPNow tracker estimates the US growth of 2.1% in Q4 2023, versus 2.0% expected on November 17. Details suggest a positive outlook for private investment growth.

On the other hand, European Central Bank (ECB) official Frank Elderson cited preference for the European Union Supernational Bonds, as well as reconsideration of Targeted Longer-Term Refinancing Operations (TLTROs) for banks. Further, ECB policymaker and Bundesbank Chief Joachim Nagel said the ECB is close to a level considered the terminal rate. Furthermore, the first readings of the Eurozone Consumer Confidence for November reprinted -17.9 figures versus -17.6 expected and -17.9 previous readings.

Furthermore, UK Chancellor Jeremy Hunt announced the Autumn Statement comprising budget proposals. The same included plans to reduce debt and cut taxes to lower inflation and boost GDP. That said, the UK's Office for Budget Responsibility (OBR) expects an increase in the headline Consumer Price Index (CPI) to 7.4% for 2023 versus March’s estimate of 6.1% while the Gross Domestic Product (GDP) growth is expected 0.6% versus March’s forecast of -0.2%.

It should be observed that Bank of Canada (BoC) Governor Tiff Macklem sounded a bit dovish as he said, “Canada interest rates may be high enough.” BoC’s Macklem also said that if high inflation persists, the Bank of Canada is prepared to raise its policy rate further.

• Strong buy: USDCAD
• Strong sell: ETHUSD, GBPUSD, Gold
• Buy: USD Index, Nasdaq, USDJPY
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

PMIs in focus on Thanksgiving Day…

Although the Thanksgiving Day holiday in the US will restrict market moves, the first readings of November PMIs from Europe, Germany and the UK will entertain the traders. Should the activity data arrive as softer, the odds of witnessing a corrective move in commodities and riskier assets, as well as the US Dollar’s rebound, can’t be ruled out.

May the trading luck be with you!