Commodity currencies are generally stronger this week so far in otherwise range trading markets. Dollar index is bounded in range of 100.64/102.05 as it turned into consolidation. Yen also pared back recent losses but the strength of recovery is so far limited. On the other hand, Sterling is also trading mildly lower in general, following the corrective mood elsewhere. In other markets, DJIA, S&P 500 and NASDAQ all closed mildly lower losing -0.28%, -0.53% and -0.56% respectively. Treasury yields also dipped with 30 year yield closed below 3% handle at 2.983. Gold stabilized but struggle to get through 1200 handle. WTI crude oil, on the other hand, staged an impressive rebound after yesterday's fall.
WTI reached as low as 45.14 but is now back at 46.70. Although it appears that a deadlock remains after OPEC's internal discussion on Monday, traders turned more bullish as Iraq's Oil Minister Jabbar al-Luaibi indicated that he is "optimistic" a deal will be reached at OPEC's summit in Vienna on Wednesday. There have also been rumors that Iran and Russia are willing to cooperate on an output cut/freeze. However, these seem to be contradictory to the countries' stances and we believe these are more of verbal tricks to lift oil prices in the short-term.
ECB president Mario Draghi said yesterday that "right now the greatest risk comes from impaired growth." And, "the greatest risk comes from the possibility the recovery doesn't firm up and stalls." Meanwhile, Draghi also reiterated that at the December meeting, ECB policy makers will "assess the various options that would allow the Governing Council to preserve the very substantial degree of monetary accommodation necessary to secure the sustained convergence of inflation towards (target)."
Meanwhile, in Eurozone, Italian voters would decide on Sunday whether they approve to amend the Italian Constitution to reform the appointment and powers of the Parliament of Italy, as well as the partition of powers of State, Regions, and administrative entities. Prime Minister Matteo Renzi, who proposed the referendum, declared that he would resign if the result comes with a "no". Investors' concern is that the country's banking sector would fail, with at least 8 banks at risk, if Renzi loses. It is estimated that Italy's banks have EUR 360b of problem loans, compared with EUR 225b of equity on their books.
OECD sounded optimistic over the global economic growth in 2017. In its latest forecasts, the agency project that world growth would reach 2.9% this year, before accelerating to 3.3% in 2017 and then to 3.6% in 2018. As the OECD's Secretary General Angel Gurria noted, "most of the signs of the low-growth trap that we have been talking about for a long time now are still there. In fact, however, there is reason to hope that the global economy may be at a point of inflection". US economy would pick up further under Donald Trump's presidency, with growth accelerating to 2.3% in 2017 and 3% in 2018, from 2.1% this year. In Asia Pacific, growth in China would moderate to 6.4% in 2017, from 6.7% this year. OECD also forecasts that RBA would begin hiking the policy rate next year while BOJ would have to add further easing measures.
On the data front, Japan unemployment rate was unchanged at 3.0% in October, household spending dropped -0.4% yoy, retail sales dropped -0.1% yoy. UK will release mortgage approvals and M4 money supply in European session. Eurozone will release confidence indicators and German CPI. US will release GDP revision, S&P Case Shiller house price and consumer confidence later in the day.