OPEC is looking to cut production as global economy heads into recession

Daily Briefing, June 25 – Economic Events Outlook, OPEC in Focus

Posted Tuesday, June 25, 2019 by
Arslan Butt • 2 min read

Good Morning, traders.

The Asian session has been extremely volatile as the market seems to price in the US Iran war sentiments, along with the dovish FOMC from the United States. With that, the US dollar weakened and gold extended gains this morning to reach the highest since August 2013 as US data released last night implied a potential economic slowdown.

The Greenback softened against a basket of currencies on Tuesday on bets the Federal Reserve may lower interest rates more than once this year, while tensions between Iran and the United States provided safe-haven support for the yen. Let’s take a look at the key economic events today.

Watchlist – Key Economic Events

Recalling our Weekly Economic Outlook, June 24 – 28, calendar is fully loaded with major economic events. However, the OPEC meeting, US CB Consumer Confidence, and Federal Reserve Powell speech remain in the highlights. Let’s look at them.

OPEC Meetings – All Day

OPEC countries represent around 40% of the world’s oil supply and are unified in their oil output levels. With so much authority over oil’s supply-side, shifts in their production levels can have a significant impact on oil prices.

OPEC meetings are typically held in Vienna and are attended by delegates from 15 oil-rich countries. They address a variety of concerns concerning energy markets and, most importantly, members agree on how much oil they will produce. The meetings are closed to the press, but officials normally talk with reporters throughout the day, and a formal statement covering policy shifts and meeting objectives are released after the meetings have concluded.

What to expect from OPEC?

OPEC members are concerned about oil prices, and they are most likely to discuss the extension of the production cut. They aren’t likely to decide output cut in this meeting, however, they will be getting their decisions ready for the July 1 and July 2 meeting.

Referring to the CME’s OPEC Meeting Outcome Probability tool, for the meeting on July 1-2, there’s a 62.7% probability that OPEC might extend the oil production cut, which might boost oil prices. However, there’s a 36.8% probability that the current output cut rate will be extended.

USD – CB Consumer Confidence – 14:00 GMT

Financial confidence (consumer confidence) is a leading indicator of consumer spending, which accounts for a majority of overall economic activity. For instance, you will spend more only if you are confident about your job or business. It’s pretty logical to say better than expected data is considered good for the economy. As per economists forecast, the consumer confidence is expected to be 132.0 in June, down from a robust 134.1 version in May.

USD – Fed Chair Powell Speaks – 17:00 GMT

The Federal Reserve Chair, Jerome Powell, is due to speak about the economic outlook and monetary policy at the Council on Foreign Relations, in New York. Consider the FOMC; he maintained a robust dovish stance to keep the dollar weaker. The US President Donald Trump keeps pressuring Jerome Powell to keep policy dovish. Chances are, Powell will keep the policy stance bearish, making the dollar more vulnerable.

Besides, the house will be open for audience questions, and the media may be interested to know more about the next policy. Somehow, any intentional or unintentional remarks from Jerome Powell will help determine further moves in the Greenback.

Good luck & stay tuned to FX Leaders!

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