OPEC+ Production Cuts Provide a Boon for the Oil Price

In Australia, the ASX200 was on the front foot to start the week with the local index benefitting from the bumper Friday night session on Wall Street and also the strong showing from the resource sector. Elsewhere in the region, the Nikkei was also posting gains however the performance of the Hang Seng index was more muted. In the US, the softer Core PCE Price Index reading was taken as a signal by markets that the Fed can afford to pause its rate hike cycle at its next meeting, though its still currently looking like a toss-up at this stage whether they hike again or not. The latest spike in the oil price may also play a hand on what the Fed does next regarding its fight against inflation, particularly if the latest jump in oil is sustained as oil at the current level won’t be doing the inflation rate any favours. In any case, traders are feeling upbeat that the banking troubles of March have not amplified into broader macro problems at this point, as evidenced by the robust equity markets performance of late.

In the forex market, the Aussie dollar was again unable to break through resistance at US$0.6730 during the Friday session despite the positive risk sentiment on display in the broader market. Today the AUDUSD was again struggling with the lower-than-expected Chinese Manufacturing PMI data not helping its cause. The Caixin Manufacturing PMI for China came in at 50, which is not a terrible result (a reading of 50 or above indicated expansion) however it was lower than the 51.4 number expected. Also weighing on the AUD’s fortunes is the upcoming RBA rate decision on Tuesday. It’s looking like a toss of the coin, but one could certainly make an argument that based on recent retail sales data and inflation readings that the RBA could afford to hit the pause button on rates for now. But whether that is the approach taken by the RBA or not will be known on Tuesday and we could see some price volatility in the AUDUSD rate and the ASX200 in the aftermath.