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Oil prices higher as OPEC+ surprise with production cut

Good morning

I hope you had a terrific weekend.

We awake this morning to a bit of a ‘risk-off’ feeling. Oil prices have leapt higher as OPEC+ announce production cuts of just over one million barrels per day, a move designed to support the stability of the oil market, they say. The US are not happy with the surprise move while futures prices suggest a mixed opening in the share markets.

Meanwhile USD has continued to move a little higher as it had done through late Friday trading. GBPUSD reached as low as 1.2275 this morning, now 1.2305, while EURUSD moved to 1.0790, now 1.0820. BoEs Haldanes comment that we could see a pause in UK rate rises did help GBP trade towards the lower end of what had been quite a tight range in GBPEUR overnight, now 1.1370

I don’t think ECBs de Guindos helped matters over the weekend, warning of risks that ECB are monitoring closely in the financial sector, adding that inflation likely to remain firmer for longer. ECBs Panetta said something we have been thinking for a while now, that firms are keeping prices higher than necessary to take advantage of higher profits, which in turn boosts inflation, in turn leading to higher rates.

RBA rate announcement in the early hours of tomorrow morning. There is a difference of opinion on this one, some see a 25bps rise most likely while others see RBA taking a pause, after raising 25bps back in the early March meeting. Back then they mentioned that although further tightening would be needed, inflation had peaked and growth had slowed. GBPAUD 1.8405 for the record.

I’ve noticed a little more talk recently over the possible BRICS currency. This has been talked about for a while now but I thought it had died down a bit but at the next BRICS summit in August it is likely to be high on the agenda. For years I’ve mentioned, on and off, the impact of currencies losing their reserve currency status. USD has been the reserve currency for so long now but the playing field is changing.

In football, Arsenal continue to lead the way with Man City following closely behind. Spurs play this evening, a crucial match if Spurs want to keep their hopes of a top-four finish alive. Three Premier leagues teams without a permanent manager now after Chelsea and Leicester removed Potter and Rodgers, Spurs having recently parted company with Conte.

All about PMIs today, although the larger geopolitical risks remain the key driver. It’s a bit chilly here but look like it’ll warm up and indeed we should have some decent sun over the next couple of days, a decent enough start for the kids holidays, just as long as you’re not trying to get out of Dover….

- 09.00 EU S&P manufacturing PMI

- 09.30 UK S&P manufacturing PMI

- 14.30 CAD S&P manufacturing PMI

- 14.45 US S&P manufacturing PMI

- 15.00 US manufacturing ISM

- 15.30 BoC business outlook survey

- 23.00 NZ business confidence

- 05.30 RBA rate announcement

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