The US dollar completed a round trip this week, continuing its relentless rise against most currencies early in the week, but then started to fall back from Wednesday afternoon and is now a touch lower than where it started. Predictably, this weighed on the prices of many commodities, such as crude oil, early in the week, but lifted them later on.
Sticking with oil, OPEC+ meets on Wednesday and is reportedly considering a cut to its oil output target of 0.5-1m bpd from November, after previously agreeing to a 0.1m bpd cut from October. Presumably, the group is concerned about prices taking another leg down since their last meeting, and demand weakening as the global economy looks set to tip into recession. However, many OPEC+ members are producing far less oil than their quotas. As a result, the actual hit to supply will be markedly lower than the headline cut to the group’s quota.
Elsewhere next week, commodity prices will continue to take direction from developments in Ukraine and Western sanctions on Russia. Data wise, the US ISM manufacturing PMI for September comes out on Monday and US non-farm payrolls for September are out on Friday. We expect both to weaken from August; we forecast the PMI to fall from 52.8 to 52.0, and non-farm payroll growth to slow from 315k to 275k.
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