OPEC Maintains Production | No Love For The Dollar | UK Data Under Focus

Posted by Naeem Aslam | 04/01/2018 09:21

  • Chinese services data shows strength
  • FOMC shows gradual rate hike
  • OPEC maintains its production
  • Brexit and the banking sector is the key point

Broadly speaking it appears that the next move for the equity markets is still to the upside. Global equity markets have started the year on the front foot, and the US markets are printing “another record high” headlines. European and US futures are trading higher encouraged by the strong Chinese economic data reading. The gauge of services industries confirmed that the growth is robust and this has been enough for traders to push the Asian markets higher.

The dollar index failed to gain any momentum, as the FOMC minutes confirmed that the Fed is in no rush in adopting any aggressive methods with respect to their interest rate hike. Gradual interest hike was the primary message for the markets from the FOMC minutes yesterday and this made investors to push the treasury yields higher.

From the minutes, it is evidently clear that the Fed is finding solidarity within the tax cuts, as it would comfort their inflation concerns but also support the growth equation too. Perhaps, it is the fiscal policies that would be able to fill the gap. Also Flattening yield is keeping many awake during the night, but this is untrue for the Fed, as minutes were released yesterday confirming the unified message “flattening yield is no longer an indication for any signs to worry”.

The banking industry is literally the heartbeat of London and London is the heart of the UK. If Theresa May does not create a good deal for the banking sector that helps banks to run efficiently, the chances of London remaining as the centre of attention will diminish further and it would also create more pain for the UK economy. 
The ongoing game of bluff which Michael Barnier is playing (which says there will be no special deal for financial services) is not the way to kick start the negotiation process for the post Brexit ties with the European Union. Traders will be keeping a close eye on this development, and on the upcoming services and composite data. We expect these numbers to show some encouraging signals with the reading of 54 and 55 respectively.

While the protesting situation in Iran continues to accelerate, the latest figures are showing OPEC has kept its production steady at 32.47 million barrels a day. Lower Libyan oil production opened the room for Nigeria to fulfil the gap. The most important point to seize from this is the OPEC production number, the cartel has sent a strong signal to the oil market that they are committed to their production cut, and they are kick-starting the near year when the compliance sits at 121% which was at the same level as November. For brent, the near terms support is at 63.80 and the resistance is at 70.03.

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