All eyes on Vienna today as the Austrian capital will be hosting both the European Central Bank monetary policy meeting and the most awaited OPEC ministerial meeting. Oil traders want signals on whether to push prices above the $50 key psychological benchmark and Euro traders wants to know whether it’s time for the single currency to find a direction after 2-weeks of boring range bound movement.
Price of oil which surged by more than 80% after testing 13-year low of $27 in January has led market participants to believe the meeting today will end without any sort of agreement on production freeze or even a new output ceiling. OPEC’s amended strategy from stabilizing prices to keeping taps wide open to maintain the cartels market share seemed successful so far, however supply disruptions from major oil exporters probably contributed more to the price gains than the strategy itself.
Iranian Oil Minister Bijan Zanganeh made it clear, his country is not willing to participate in an output ceiling as they want to recover the lost market share following the lift of sanction earlier this year. Meanwhile United Arab Emirates oil minister Suhail Al Mazrouei who suggested that the market will fix itself to a price that is fair to the consumers and to the producers shows another sign of no willingness for a coordinated deal.
It will remain to be seen whether Saudi Arabia’s new oil minister Khalid al-Falih who replaced Ali Al-Naimi long regarded as the maestro in oil world is preparing for a surprise deal. If KSA and Iran put their political conflicts aside and showed willingness to achieve what’s best for the cartel, oil prices has the potential to rally further from current levels otherwise $50 could be a short term high.
Euro traders who experienced two weeks of boring range bound movement in the single currency are likely to get some action as European Central Bank meets today. No changes are expected on the monetary side, but traders will draw more attention on the tone of Mr. Draghi, and the new economic forecast. Although recent economic data were mixed it was more to the upside and yesterday OECD raised Eurozone’s GDP forecasts from 1.4% to 1.6%. If ECB’s economic forecast reflects similar projections and inflation figures for 2017 and 2018 revised upwards after the surge in oil prices, then expect EURUSD to break above the two-week high of 1.1216.
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