Oil prices remain stuck in a narrow range, but trade in a moderately positive area ahead of the crucial decision by OPEC+. Since yesterday, there has been little extra clarity about the decision, and besides, there have been reports that the meeting scheduled for today may be postponed to Thursday. Current prices in the oil market price in an extension of the current cuts (7.7 million bpd) for at least three months, so if participants do not agree, it will be a huge blow to market rebalancing outlook. In addition, the initial price reaction to vaccine news has been exhausted and further rally in prices requires a fundamental shift in supply or demand. Demand prospects in the short term are not very bright, so the focus is on output policy of oil-producing countries.
For the fourth month in a row, deflation holds its grip into Eurozone, the data from November showed. The broad price index dropped 0.3% YoY, against expectations of 0.2%. At the same time, core inflation stubbornly stays at 0.4%. For the ECB, this is yet another challenge that could spur the Central Bank to a more decisive response in December, although judging by the speech of Chief Economist Lane and the minutes of the November meeting, the chances of this are small. EURUSD was never able to break through the 1.20 after the gentle touch of the level on Monday, preferring to wait for OPEC's decision and get more information on the ECB's December action.
Assuming that OPEC will nevertheless make a positive decision on supply cuts, it is probably worth focusing on the continuation of the rise in EURUSD, considering long positions from current levels:
The Eurozone manufacturing PMI fell from 54.8 to 53.8 in October but remains in the expansion zone. The Chinese PMI in the manufacturing sector showed more optimistic dynamics, rising from 53.6 to 54.9 points. Notably, this is the highest level since November 2010. This is further confirmation that the second wave of coronavirus that we are seeing in Europe and the United States has passed tangentially for the key Asian economy, which diminishes the degree of impact of the second coronavirus shock.
Looking at other Asian economies in November, the Japanese PMI rose, while the South Korean one climbed to its highest level since February 2011. Factory activity also increased in Taiwan and Indonesia, supported by strong demand in China.
The PMI indices are comparative statistics and show how activity in the sector has changed from the previous month. Data for November showed that Asian factories experienced an uptick compared to October, keeping key stock markets in Europe and America relaxed.
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