OPEC+ And U.S. Data Sensitivity


The press release references several positive macro indicators to justify raising production (falling OECD inventories, vaccine roll-out, stimulus measures in several key economies), all of which make sense. The price is reacting sensibly, focusing apparently on the big picture macro view and direction of travel for oil demand, rather than on the surprise decision by OPEC. OPEC+ will continue to monitor macro conditions closely, and there should be little doubt the group will step in to put a floor on the oil price if macro conditions deteriorate.

With trading conditions at holiday-thinned levels, and with the few traders who are around, no one seems to be looking to make much of a meal out the latest sentiment shifts with lying in wait. 

Market sensitivity to US economic data

Looking at the market reaction to a string of recent positive US economic data beats, investors are seemingly becoming less sensitive to the steady stream of positive US news, suggesting that a solid economic outlook is now largely priced, So it might take a significant beat above 800K NFP whisper for the dollar to return to bullish form.

On its own, that suggests a stronger-than-consensus number, in the 750k-850k ballpark, will not elicit sharper-higher UST yields or material USD strength.

In Europe, in contrast, the impact of further negative news has declined. Markets may now start to react asymmetrically to news flow: US yields and the dollar might not move much on further good news. In contrast, European yields and the euro could become very sensitive to any upside surprises on vaccinations, case counts and broad economic data.

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