The highly anticipated meeting in Doha, Qatar ended without any agreement. WTI gapped 2,000 points, fell below $40 a barrel.
A total of 16 oil-producing nations, both within and outside OPEC, gathered in Doha last weekend. In our research last week, we mentioned one of the major hurdles was whether Iran will agree to the production freeze deal. True enough, Iran was not even present in the meeting. “No deal” is “bad deal”, market sell-off at the opening of this week. WTI rallied past $43 a barrel before the meeting, but open with a 2,000 points gap today. It is currently trading below $40 a barrel. Saudi Arabia will only agree to the freeze deal provided other fellow oil-producers follow suit, including Iran. Saudi Arabia has enjoyed the good times when oil prices went beyond $100 a barrel. On the other hand, Iran has suffered over decades of sanction. It will take a lot of understanding and spirit of sacrifice for the production freeze proposal to go through. This will not be an easy task; we expect oil to be under pressure in the near term and further signs of disagreement would push the prices further south.
Bank of Canada kept their interest rates unchanged at 0.5% and maintained their optimism in the statement as we have expected. They displayed their hawkish outlook by revising their GDP forecast for 2016 upwards, from 1.4% to 1.7%. However, the looming uncertainty over crude oil prices ahead of Doha meeting kept the loonie from appreciating. The central bank may be optimistic, but the market is worried if the oil freeze deal is “deeply frozen”, the pressure on oil prices will weigh down the loonie as well.
Bank of England (BOE) did not do anything to rock the boat. BOE Governor Mark Carney has cautioned UK’s referendum on their EU membership is the biggest risk to their domestic financial stability. “There had been some signs that increased uncertainty might be beginning to weigh on demand,” the BOE’s Monetary Policy Committee said on Thursday. We expect market to maintain their focus on “Brexit” rather than data, leading up to June’s referendum. The sterling has been trading between 1.40 and 1.45 since March, but the highs in the past 1 month were getting lower, which tells us market are cautious and slightly fearful.
This week’s calendar is relatively quiet, only European Central Bank (ECB) is scheduled to announce their monetary policy and interest rate. After their latest round of stimulus and easing, the recent data were kind of mixed with no obvious improvements, which means no obvious sign of deterioration as well. We expect ECB to remain cautious outlook and express concern over global development. Will Draghi follow RBA Stevens to lament over persistent dovishness from Fed?
Our Picks
WTI Oil – Bearish. After the disappointment from Doha meeting, major hurdles have to be overcome before any positive deal can be sealed. We expect WTI to remain weak in the near term.
USDJPY – Bearish. Fall in oil price has sparked fear and spur demand for safe-haven. Possible to go short after price closes below the support around 107.80. Upsize risk is intervention from Bank of Japan.
DAX – Bearish. Dax is likely to gap down at the opening after the Doha meeting fell through. However, market is likely to prepare for ECB meeting towards middle of the week.
Top News This Week
UK: Claimant Count Change. Wednesday 20th April, 4.30pm.
We expect figures to remain unchanged at -5.0K (previous figure was -18.0K).
Europe: Minimum Bid Rate. Thursday 21st April, 7.45Pm.
We expect figures to remain unchanged at 0.0% (previous figures were 0.0%).
Canada: Core CPI m/m. Friday 22nd April, 8.30pm.
We expect figures to come at 0.4% (previous figure was 0.5%).
Fullerton Markets Research Team
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