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Encouraging surveys from Europe, but a long way to go

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By Craig Erlam  

Thursday was relatively slow in the markets, as you’d expect due to the US Thanksgiving bank holiday, but there were some releases and OPEC+ speculation that kept things interesting.

In the morning we had PMI surveys from the UK and euro area and in both cases, we saw some improvements that may suggest both are starting to turn a corner, albeit gradually in the case of manufacturing.

In fact, the UK services PMI unexpectedly moved back into growth territory, reinforcing the view that the economy may once again defy expectations and avoid recession.

Growth will remain almost flat, but the repeated display of resilience is encouraging. The question is whether it will translate into interest rates staying high for longer.

The ECB minutes were largely as you’d expect, with policymakers not yet prepared to declare victory over inflation, insisting instead on keeping the door open to another rate hike, while acknowledging that they are on course to bring inflation back to target by 2025.

Oil volatile ahead of next week’s OPEC+

Oil has remained quite volatile after briefly plunging on Wednesday following reports that OPEC+ has decided to push back its meeting from November 16 to 20.

The initial market reaction appeared to suggest traders view this as a lack of unity behind supply cuts going into the new year, but it wasn’t long until oil reversed those moves.

While there was more speculation over the day, we may have to wait until the virtual meeting on the 30th to learn just how unified the group remains and whether Saudi Arabia and Russia will need to do any additional heavy lifting in order to keep prices high.

An explosive breakout in gold?

Gold is trading below $2,000 after failing to significantly break higher again over the last couple of days.

Just as we saw last month, the yellow metal over the last couple of days has breached $2,000, only to end the day below again, further reinforcing it as a considerable level of resistance.

The difference this time is gold has some more favourable data on its side and a slightly less combative Federal Reserve. If that proves to be enough, it will be interesting to see just how explosive any break higher would be and how long it would be until it’s testing record highs.

 

Craig Erlam is Senior Market Analyst, UK & EMEA at OANDA

Opinions are the author’s, not necessarily that of OANDA Global Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.