The oil price has been unsurprisingly choppy in the lead-up to Opec’s meeting in Vienna on Wednesday. Will a deal to curb or cut production be reached?
Perhaps more importantly, will any deal be adhered to? Sceptics expect “yes” for the former and “no” for the latter.
But forex strategists at UniCredit think there is a greater chance of positive outcomes for oil-related currencies from the Opec meeting.
Brent crude has pulled back by several dollars from the recent peak it reached following the Algiers proposal to cut production, “suggesting that the market has priced out a considerable amount of the initial optimism”, said the Italian broker.
“In this sense, if Opec members this Wednesday do not agree on cutting production, sustained downside in oil prices and hence oil-related currencies appears to be limited.”
Alternatively, any deal deemed credible should cause a jump in oil prices, and — providing the US dollar (USD) does not see another surge higher — should boost the usual commodity currency suspects such as the Canadian dollar (CAD) and Russian rouble (RUB), said UniCredit.
It has looked at longer term correlations with the oil price and those currencies.
“We find that, should the oil price rise towards $55 a barrel, this by itself would be consistent with USD-RUB at around 60 (ie. a gain of 8 per cent for the RUB) and USD-CAD at 1.27 (ie. an appreciation of roughly 5.5 per cent for CAD).”