Trading Plan – Monday 5th July 2021: OPEC+ deal in the balance

Mark NugentJuly 2021, Trading Plan

Trading Plan – Monday 5th July 2021: OPEC+ deal in the balance

Morning traders.

Well, OPEC was scheduled to reach a production agreement at last Thursday’s meeting. This was delayed to Friday and now into today. The core of the issue is that all OPEC countries want to increase production (by cutting their previously agreed cuts). However, they also want to extend the deal to the end of 2022. This is the problem. The UAE feel their baseline, the figure upon which their allowed production is calculated, is too low and they do not want to lock this low figure into an extended agreement. They have threatened to leave OPEC in the past and that hangs in the air. In a nutshell, any deal will probably see oil continue to grind upwards as we come out of the covid lockdown. Any splintering of the cartel will almost certainly see prices fall significantly as members do their own thing. A meeting is scheduled for 3pm today, Vienna time. Yes, Vienna time. We will see.

The ECB’s Schnabel suggests they will allow the inflation target to be breached to the upside, joining the Bank of England and the Fed in that view. So, no interest rate hikes any time soon.

In the UK, PM Johnson is set to announce plans to abandon many Covid rules from 19th July.

The US is on holiday today so things may be slow until tomorrow.

As of 1130 BST we are moderately risk-off. Interestingly, the JPY and the commodity currencies are moving as expected in this risk environment and have been for a few weeks. This has not been the case this year and it is a very tradable. Worth a look at tonight.

Happy trading. I’ll be back on Wednesday.

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