OPEC supports commodity currencies

Eurozone

According to IHS Markit, business activity in the eurozone's manufacturing sector has been at its highest level since April 2000, reaching 60.1 points in November against 58.5 points a month earlier. Record growth is noted for all leading economies of the eurozone. In particular, Germany achieved the second highest result in the history of recordings since 1996. In France - it reached a maximum of 7.5 years, in Italy - for 81 months. Also, it should be noted the high growth in employment, investment in equipment is growing steadily, which implies continued growth in 2018.

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By the end of the week, the euro was not able to reach the 1.20 mark, but there is every reason to assume that this is not the limit. The next meeting of the ECB will be held on December 14, and the market is increasingly inclined to the fact that the regulator will present a plan to taper the current soft monetary policy and may announce an upcoming rate hike.

On Tuesday, a PMI report in the services sector showed expectations are positive, the euro has its own driver, and growth may continue if there is news of a tax breakdown through the US Senate. If the tax plan is approved, then the dollar will regain its leadership, and the euro will not be able to overcome the level of 1.20, trade in this case will go into the lateral range from downward trends.

United Kingdom

The consumer confidence index from Gfk decreased to -12 points in November, with the indicator already being in negative territory for 20 months. This is the lowest value since July 2016 immediately after the Brexit vote, and reflects consumer concerns about the impact of the recent rate hike by the Bank of England. Retail trade is in decline, as household incomes lag behind inflation.

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On Tuesday, the PMI index will be published in the services sector, and it is expected to decline relative to November. Until Friday this is the only significant publication, so macroeconomic factors will have a limited impact on the pound rate. More important is the situation with the negotiations on Brexit, the agreement on the first phase of the negotiations, which includes questions on migration policy, the Irish border and the exit draft law, should be reached already on Monday, otherwise the EU before the planned summit will not be able to decide on the transition to the next phase. Reports of a positive outcome of the talks can provide significant support to the pound.

Growth of the pound against the dollar will slow down, probably decline at the beginning of the week to 1.34, further dynamics will depend on news from the US.

Oil

Oil grows after OPEC and a number of countries - independent oil producers - agreed to extend the agreement on limiting production to the end of 2018. A reduction of 1.8 million barrels per day should, according to OPEC +, stabilize prices at levels not lower than current ones. The decision was taken unanimously. Moreover, the agreement will now be joined by Nigeria and Libya, which will limit production to the levels of 2017. The unanimous decision demonstrates the determination of OPEC + to keep the situation under control and reduces the risks of uncontrolled collapse.

The next meeting of OPEC + will be held in June. A number of analysts believe that at this meeting, in case of an increase in oil above $ 65/bpd, it may be decided on the phasing out of restrictions, but more likely other - OPEC + will demonstrate a unified approach and expressed their willingness to cooperate and further that the de facto fix the new reality of the oil market.

The material has been provided by InstaForex Company - www.instaforex.com