By Craig Erlam
It’s been a wild couple of days in financial markets from a potential FX intervention to interest rate decisions and vast amounts of economic data, not to mention a gathering of some of the world’s largest oil producers.
And yet it doesn’t really feel like a lot has changed.
The yen is less than 1% from Tuesday’s lows following a rumoured, but not confirmed, intervention from the Japanese Ministry of Finance. While interventions are uncommon, even if it doesn’t feel that way this past year, a failure to acknowledge them by officials immediately after is not.
That it’s taken place at a time when the Bank of Japan is being forced to buy bonds in order to support its yield curve control target may explain why we didn’t see as large a move in the markets and why it’s since pared almost two-thirds of those gains.
Another intervention may be necessary, as we saw last year in order to get the message through.
Mixed US figures ahead of jobs report
We’ve seen a lot of economic releases from the US in particular over the last day or two and I’m not sure it drastically changes anything, despite the initial reaction to the JOLTS number.
That could easily reverse those gains next month and suddenly the trend of much weaker openings remains on track.
The ADP release should always be taken with a pinch of salt ahead of the US jobs report on Friday. If it can be replicated later this week then people will sit up and take notice, but at this moment, it’s just another ADP number that will probably be well off the NFP.
RBNZ attempts hawkish hold
Much like the RBA, the RBNZ left interest rates unchanged overnight and ultimately struck a relatively neutral tone, despite efforts to add a hawkish twist.
The New Zealand central bank is of the view that it’s done with the tightening cycle and markets appear to agree, with the Kiwi dollar slipping after the decision and markets not convinced by the need for another increase.
Oil slips as OPEC+ looks to maintain cuts
Oil prices fell more than 3% on Wednesday as OPEC+ looks set to leave their output targets unchanged, while Saudi Arabia and Russia reaffirmed their commitment to additional cuts until the end of the year.
That may not sound particularly bearish for oil, but in doing nothing, the group is leaving the door open to output increases from the turn of the year which arguably is bearish for price.
It will all depend on the outlook for the economy and how balanced the market is later in the year, but it has taken some of the heat out of the market and makes $100 oil less likely.
Craig Erlam is Senior Market Analyst, UK & EMEA at OANDA
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