Volatility Reigns, as OPEC & ECB Hold Out

Volatility Reigns, as OPEC & ECB Hold Out

2 June 2016, 17:08
Roberto Jacobs

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.


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