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OPEC meeting in focus for traders this week

All week oil traders will be keeping a close watch on any statements and comments from the various members of the OPEC+ cartel ahead of the meeting on Saturday, June 1st. Earlier this month, OPEC stuck to its forecast for strong growth in global oil demand in 2024.  

The question is how long Saudi Arabia will remain willing to carry the burden of voluntary cuts as production elsewhere grows. The Saudis have cut production by 2 million barrels a day, ceding market share to non-OPEC countries like the US.  

Is it time for the kingdom to open the spigots? Elsewhere, we are looking at some big inflation releases from the US, Japan, and the Eurozone. A holiday in the UK and US will mean Monday is fairly quiet.

Here are the week’s key events:

 

Monday, May 27th: BoJ’s Ueda to speak; Memorial Day holiday

Attention at the start of the week is on the Bank of Japan governor Ueda’s speech at the Institute for Monetary and Economic Studies. Japanese bond yields have moved up to decade-highs as a weak yen has prompted speculation that the BoJ may be inclined to raise rates again this summer, perhaps as soon as at its June 13th meeting.  

10-year JGB yields broke 1% and Ueda has been sounding a bit more hawkish in recent weeks. Watch JPY crosses – EURJPY may be particularly interesting as the European Central Bank is now considered certain to cut rates in June. Holidays see London and New York shut, so volumes will be especially thin, but elsewhere watch out for the German Ifo business climate report.

 

Tuesday, May 28th: Japan inflation 

Data is fairly light – watch for the UK BRC shop price index ahead of the next round of CPI inflation, which is important for GBP crosses. Japan’s inflation dynamic and what this could mean for monetary policy in light of Ueda’s remarks will be illuminated by the latest BoJ core CPI report.  

Retail sales figures from Australia will also be worth a look for AUD crosses. The US session features the Case-Shiller home price index and the latest consumer confidence survey from the Conference Board. Confidence retreated further in April, reaching its lowest level since July 2022.

 

Wednesday, May 29th: Australian and German inflation reports

The latest Australian CPI inflation report will be closely watched by traders keen to know which way the Reserve Bank of Australia may go next. Inflation has come down a lot but remains stubborn – CPI fell to 3.6% in Q1 2024 from the previous 4.1% but was above the market consensus of 3.4%. QoQ rose 1.0% vs 0.6% in the prior quarter.  

RBA meeting minutes showed policymakers considered raising rates as the flow of data since the previous meeting had “mostly been stronger than expected”, and that it was “difficult either to rule in or rule out future changes’ to rates”, though it stopped short of adopting a tightening bias. Any acceleration in the rate of inflation could see rate hikes come back on the table.  

Germany’s preliminary CPI inflation data will be closely watched for what it could signal for the ECB meeting in June. There is a strong consensus that the ECB will cut rates, so it would take a big upside surprise to dissuade the market from this belief. The indicators point to disinflation persisting, with the PPI last week showing a – 3.3% decline in April.  

Earnings:  HP (HPQ), Salesforce (CRM)

 

Thursday, May 30th: US GDP Update

Swiss National Bank chairman Jordan is scheduled to speak ahead of the release of latest GDP data for Switzerland – CHF crosses on watch. Italian and Spanish CPI inflation data is due also. The day’s big release though is the second reading for Q1 GDP in the US.  

The initial reading showed growth slowed more than expected, but inflation was hotter than forecast. GDP expanded 1.6% in the first quarter, well below the 2.4% anticipated while core PCE inflation accelerated to 3.7% from 2.0%. This is an important report ahead of the June meeting of the Fed, but it seems markets have all but taken a rate cut next month off the table.

Earnings: Costco (COST)

 

Friday, May 31st: Inflation Day, US PCE Index Release

The Fed’s preferred gauge of inflation, the core PCE index, is the highlight as traders look to see whether it supports the more dovish narrative that’s ensued in the wake of the softer-than-expected CPI print.  

The last reading for March was 2.8%, unchanged from February and slightly higher than expected. Ahead of this, look out for the Tokyo core CPI report for more clues as to where the BoJ and yen go next. Eurozone flash CPI inflation data should confirm the ECB is about to cut. China’s manufacturing and non-manufacturing PMIs are also due out.

The OPEC meeting will then follow on Saturday.


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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.

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