Crude Oil recovers on mixed OPEC+ updates, sluggish US Dollar and cautious optimism

Markets portray cautious optimism on early Friday as odds of witnessing no Fed rate hike join upbeat China Caixin Manufacturing PMI. However, mixed updates from Gaza and anxiety ahead of today’s speeches from ECB President Christine Lagarde, as well as Fed Chair Jerome Powell, prod the risk-on mood.

That said, the greenback jumped heavily the previous day even as the scheduled data marked mixed releases.

With this, the US Dollar eases after witnessing the biggest daily jump in 10 weeks while EURUSD rises the most among the G10 currency pairs. Further, Crude oil and Gold reverse the previous day’s losses while Antipodeans remain sidelined. Elsewhere, Dow Jones printed the highest daily close since January 2022 while the Asia-Pacific shares edge higher.

It should be noted that BTCUSD and ETHUSD rose more than 1.0% each amid hopes of witnessing more fund inflow ahead of the US SEC’s approval of the Spot ETF approvals.

Following are the latest moves of the key assets:

• Brent oil prints mild gains around $81.00 to pare the biggest daily loss in two weeks.
• Gold price recovers to $2,040 after snapping a five-day uptrend the previous day.
• USD Index struggles to keep the previous day’s recovery at 103.40 at the latest.
• Wall Street closed mixed while Asia-Pacific stocks edged higher. Further, equities in Europe and the UK begin the day on a positive side.
• BTCUSD and ETHUSD remain firmer around $38,300 and $2,100 by the press time.

Crude oil rallies amid sluggish markets…

On Thursday, the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia, known as OPEC+, announced an additional one million barrels per day (bpd) reduction in the output of member countries. The news initially fueled the black gold before the cartel member Angola refused to follow the voluntary agreement. The same joined downbeat prints of China’s official NBS Manufacturing PMI and a stark recovery in the US Dollar to mark the biggest Oil price fall in two weeks.

Alternatively, firmer prints of China’s Caixin Manufacturing PMI join the news of the US purchase of 2.7 million barrels of Oil for the Strategic Petroleum Reserve (SPR) to put a floor under the black gold on early Friday. Additionally, the market’s rethink of the OPEC+ verdict and the Greenback’s retreat also allow the energy benchmark to pare the weekly losses.

On the other hand, the US Dollar Index (DXY) marked the biggest daily gains in seven weeks while tracing a surprise recovery of the Treasury bond yields. In doing so, the Greenback’s gauge versus the six major currencies ignored the mostly downbeat US economic releases about inflation, income-spending and employment. It’s worth noting that the DXY’s run-up triggered the XAUUSD’s pullback from an important resistance zone surrounding $2,050.

That said, the US Core Personal Consumption Expenditure (PCE) Price Index, namely the Federal Reserve’s (Fed) preferred inflation gauge, matched downbeat forecasts of 3.5% YoY and 0.2% MoM for October, versus 3.7% and 0.3% respective priors. Further, the Personal Income and Personal Spending both printed 0.2% monthly growth for the said month, as expected, while easing from 0.4% and 0.7% previous readings in that order. Additionally, the Chicago PMI jumped to the highest in 17 months with a surprise rally to 55.8 for November from 44.0, beating the market consensus of 45.4, whereas Pending Home Sales came in better-than-expected -2.0% to -1.5% for October, compared to 1.0% prior. It should be noted that the US Initial Jobless Claims rose 218K for the week ended on November 24, compared to 220K expected and 210K prior, but the Continuing Claims jumped to the highest level since November 2021 with 1.927M figure versus 1.841M previous readings.

In the case of Europe, the bloc’s inflation data marked a disappointing fall for November but the policymakers’ rejection of the rate cuts seemed to help the EURUSD recover of late. That said, ECB executive board member, Fabio Panetta, said that the risks to the Eurozone economy are tilted to the downside while adding, “Monetary tightening has not yet had full impact and will continue to dampen demand in the future.” On the contrary, ECB policymaker and Bundesbank Chief Joachim Nagel stated, “Further rate hikes remain a possibility as inflation risks are still on the upside.”

On a different page, the USDJPY pair’s rebound justified higher US Treasury yields and ultra-dovish statements from Bank of Japan (BoJ) policymakers, before the latest retreat. On the same line, NZDUSD failed to justify upbeat NZ data and RBNZ statements amid lackluster markets. Furthermore, GBPUSD grinds higher despite looming economic concerns about the UK as the Bank of England (BoE) officials renew rate hike bias.

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

Central bankers, US/Canada data eyed…

While the market’s attention will be on Fed Chair Jerome Powell’s speech to confirm the end of rate hikes at the US central bank, comments from ECB President Lagarde will also be important as recession woes in the bloc strength. Further, the US ISM Manufacturing PMI for November and Canada’s employment data for the said month will also entertain the momentum traders. Should the policymakers defend “higher for longer” rates and advocate soft-landing, the odds of witnessing a US Dollar run-up can’t be ruled out.

May the trading luck be with you!