As the world gets used to the new calendar year, global markets are wasting no time in getting things moving.
Investors and traders will also have an eventful week with an OPEC+ decision, FOMC minutes, and the latest US nonfarm payrolls report to be taken into consideration along with other economic data releases and scheduled Fed speak:
Monday, January 3
- EUR: Eurozone December Markit manufacturing PMI (final)
- USD: US December Markit manufacturing PMI (final)
Tuesday, January 4
Wednesday, January 5
- EUR: Eurozone December services and composite PMIs (final)
- US crude: EIA weekly US crude oil inventory report
- USD: FOMC minutes
Thursday, January 6
- CNH: China December Caixin services and composite PMI
- EUR: Germany December CPI and Eurozone November PPI
- USD: Fed speak – St. Louis Fed President James Bullard, US weekly jobless claims
Friday, January 7
- EUR: Germany November industrial production and Eurozone December CPI
- USD: US December nonfarm payrolls
- USD: Fed speak – Atlanta Fed President Raphael Bostic, San Francisco Fed President Mary Daly, Richmond Fed President Thomas Barkin
Oil prices to take cues from OPEC+
But even with the new year, the same event risks remain. OPEC+ is set to decide on Tuesday whether to raise their collective output levels by another 400k barrels in February. Initial reports show that Omicron’s impact on global demand on oil has been relatively mild, which has fueled the double-digit recovery in oil prices in December.
This suggests that OPEC+ should be comfortable enough to press ahead with the intended output hike, though their commentary surrounding the oil market’s outlook and their plans to gradually restore supplies could dictate whether oil prices can climb significantly higher past $80/bbl.
The shocker would be for OPEC+ to say ‘no’ to a February hike, which was what markets had expected for last month’s meeting, leaving oil bulls to gleefully capitalize potentially on such a surprise decision.
Better-than-expected US jobs report to help DXY retain 96 handle?
Despite Omicron’s threat, markets are currently forecasting the December US nonfarm payrolls to come in around 400k, with the unemployment rate easing lower to 4.1% from November’s 4.2%.
These headline figures could still joly markets, even though the labour market’s recovery has taken a back seat to fears over the US inflation outlook, at least in terms of motivating the Fed to raise interest rates.
Given this obsession over the inflation outlook, perhaps the market’s attention will be focused more on wage growth, which is forecasted to have moderated down from 4.8% in November to 4.2% last month. If wage growth rises higher than expected, that could reinforce the notion that US inflation is likely to stay, especially with added demand-pull forces in play. That could then strengthen market expectations for Fed rate hikes this yearand keep the DXY above 96.0.
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