Volatility Reigns, as OPEC & ECB Hold Out
• What will happen when Draghi turns hawkish?
• OPEC out to preserve market share
• Will Verizon strike hit tomorrows NFP number?
OPEC and the ECB have led a highly volatile day today, as initial
positivity turned sour at the decisions from both parties to remain as
they were. The ECB was never expected to change monetary policy today
and instead the focus was upon the language and forecasts expressed by
Mario Draghi. Upward revisions to growth and inflation for 2016
certainly made a change from the usual fare, potentially marking a
turning point after a sustained period of pain. Now that the tide is
slowly turning, it will be interesting consider the fate of the single
currency in a world where Super Mario one day doesn’t come offering his
token dovish gift to the markets.
No surprises from OPEC today after members agreed to stick to their
existing policy, scuppering any hopes of a new output ceiling. It is
simply a case of market share for the Saudi’s, and thus without the
agreement from Iran and non-OPEC members, it was always a long shot that
the committee would emerge with anything but the status quo. Amid bonds
sales, austerity and the Aramco share sell-off, it is clear that the
Saudi Kingdom is in a more uncomfortable position than it is used to.
However, while US production continues to fall and prices rise, the
Saudis have temporarily found a sweet spot. The question is how long it
will last.
Today’s rise in the ADP payroll figure was certainly welcome ahead
of tomorrow’s official reading. However, the real story that everyone is
talking about is the impact of a near 40,000 person walk out at Verizon
and what impact that will have upon tomorrow’s headline NFP number. The
ADP does not count striking workers as unemployed,
whereas tomorrow’s figures are expected to factor them in, providing a
strong chance that tomorrows number will disappoint once more.
