OPEC's biannual meeting on November 30 was about formalising the preliminary deal made in Algiers in September. Iraq and Iran finally came to the table and joined Saudi Arabia in formally trying to stabilise the oil price. This constitutes the first voluntary OPEC production cut in more than eight years and the oil price skyrocketed by 8% after the announcement. OPEC has decided to cut production by 1.2 million bbl/d, leading to a new production target of 32.5 million bbl/d effective January 1, 2017. The meeting was crowded with participants, as has been the case since November 2014, when the group decided to maintain output despite falling prices.
- USD: High costs for the USD in the FX swaps
- EUR: Referendum in Italy and Austrian presidential election on Sunday
- EURNOK: Risk of a weaker NOK in next week's survey
- USDCNY: Weaker CNY vs. the USD, but unchanged effective rate
Continued steepening in sight
We saw huge interest rate movements in the aftermath of the US election, and this trend has continued. The Fed's re-pricing has been clear and the market is starting to approach two rate hikes in 2017. An increase in December is a dead certainty. The market is thus moving toward the Fed's own interest rate forecast. We see knock-on effects in the Swedish market and consider there to be scope for a steeper Swedish curve, which is supported by the increasingly strained labour market.
There continues to be a major, widespread shortage of dollars after the changed rules for US money market funds which took effect on October 14. The question is how far the Fed and other major central banks will allow this to go before they again start to utilise the facilities that are still available since the major financial crisis eight years ago.