We’re moving into the latter half of the week and closer to the NFP numbers. Today’s ADP employment figures were very bad and have set up Friday for the potential of a lot of volatility on a big miss. OPEC+ came in as expected with an extra 400K barrels per day for March and now we’re all trying to work out whether there will be less demand with increased supply.
According to Eurostat's preliminary report published this morning, consumer prices in the Eurozone rose by 5.1% in January compared to the same month in 2021 and exceeded market expectations. In the report, energy was projected to have the highest inflation rate of 28.6%, followed by food, alcohol, and tobacco with 3.6%, services with 2.4%, and non-energy industrial goods with 2.3%.
The EURUSD responded well to the higher inflation data as the market participants now expect the ECB to have to come around to being more Hawkish. Whether or not they can is to be seen and we get to hear from them tomorrow. The EURUSD imbalance on the release has been backfilled so we have found support. If the ECB comes out more Dovish or dismissive of the persistent inflation the euro is likely to sell off. A Hawkish ECB and we now have a base and swing low to place a protective stop for an intraday long.
The euro has been strong for the entire London session and into the London close and we’re seeing flows into safe havens and out of commodity pairs. This is a risk-off end to the day and equities will come down into the US close if this continues.
According to the US Energy Information Administration (EIA) this afternoon, crude oil inventories in the United States fell by 1 million barrels in the week ending January 28 to 415.1 million barrels.
The US crude oil refinery input averaged 15.2 million barrels per day this week, down 248,000 barrels per day from the previous week. The US imported 7.1 million barrels of crude oil per day last week, which is an increase of 800,000 barrels per day compared to the previous week. The total commercial petroleum inventory went down by 5.8 million barrels and follows the lower US API inventories reading from yesterday.
As a result of the latest OPEC Ministerial Meeting (ONOMM), the Organization of Petroleum Exporting Countries (OPEC) and other signatories to the Declaration of Cooperation (DoC) have decided to increase monthly production by 400K barrels per day for the month of March 2022. According to OPEC's recent Monthly Oil Market Report, the growing demand for oil will amount to 4.2 million barrels per day (BPD) in 2022. It now needs to ensure members fulfill their quotas as there are still questionable amounts of spare capacity.
Brent fell on the announcement of further increases in supply but has so far kept above the $88 support level. Using the USDCAD as a proxy for which way I think Oil is going to go a rising Loonie (USDCAD) will see oil prices fall further and a bullish day tomorrow would set up for a test of the 1.29500 swing highs.
Automatic Data Processing (ADP), Inc. is an American provider of human resources management software and services. Each month they generate a report which proceeds to the US government's Bureau of Labor Statistics Non-Farm payroll which is reported on the first Friday of the month. Total nonfarm payroll employment in the United States declined by -301K in January which came as a surprise to market analysts who had predicted a consensus figure of +207K but as low as +50K to a high of +305K.
Small businesses experienced the largest decrease of 144,000, followed by large businesses with 98,000 and midsized businesses with 59,000.
Tomorrow the pound and euro are in focus because the Bank of England and European Central Bank deliver their bank rate and asset purchase guidance.