First light news: Trump’s Oil strategy and Pre-NFP positioning

Oil markets nearing 2021 levels

US President Donald Trump once again took centre stage, announcing that Venezuela would cede about 50 million barrels of Crude to the US – currently valued at approximately US$3 billion. As you would expect, Trump’s comments – albeit light on specifics – weighed on global Oil benchmarks, sending Brent and WTI around 2.0% lower yesterday. The trend remains firmly to the downside in both markets, with price action venturing near key support at US$58.77 and US$55.38, respectively. A decisive break south of these levels would likely usher in fresh lows not seen since 2021.

Record highs for stocks and range-bound conditions for currencies

Regarding Stocks, the S&P 500 posted its third consecutive gain yesterday, climbing 43 points (0.6%) to settle at 6,944, while both the Dow and the Nasdaq 100 carved out fresh all-time highs of 49,509 and 25,639, respectively. The confluence of anticipated Fed policy accommodation and resilient corporate earnings continues to underpin a compelling bullish narrative for equities this year.

In the FX space, currencies traded in relatively tight ranges ahead of US employment numbers this week. The USD extended its recent recovery, rising 0.2% on Tuesday and reversing Monday’s modest decline. The AUD extended gains in recent trading, testing levels not seen since October 2024, while the EUR and GBP fell 0.3% against the buck.

What am I watching today?

The November (2024) Australian CPI inflation numbers landed overnight and largely decelerated across all key measures. Headline YY inflation cooled to 3.4% from 3.8% in October, considerably lower than the market’s lowest estimate of 3.6%, though still elevated relative to the RBA’s target band. The AUD experienced a brief dip before bulls regained control.

It is worth recalling that RBA Governor Michele Bullock echoed hawkish rhetoric at the previous meeting, indicating that the next move in rates may be upward rather than down, with money markets currently fully pricing in a 25-bp rate hike in May. Q4 25 inflation numbers will be key at the end of this month. If we see the trimmed mean and median measures rise above 3.0%, this will be positive for the AUD, as investors will likely price in a faster pace of tightening and bring March’s (possibly even February’s) meeting firmly to the table. 

Closer to home, the December (2024) eurozone flash CPI inflation data will cross at 10:00 am GMT today. The YY headline print is expected to ease slightly to 2.0% from 2.1% in November, while the YY core measure is forecast to remain unchanged at 2.4%. As I’ve noted previously, I anticipate limited market reaction from this report, given that the disinflationary impulse largely reflects euro strength and energy price base effects. Money market pricing for 2026 also remains firmly anchored – it would require genuinely surprising data to alter this trajectory.

Across the Atlantic, ahead of Friday’s December (2024) US NFP release – consensus expects the US economy to have added 60,000 jobs (from 64,000 in November) – today’s US highlights include the December ADP report at 1:15 pm, the November JOLTS report, and the December ISM services PMI release at 3:00 pm. 

Following a few months of compromised data due to the government shutdown, clean readings are crucial. The Fed remains in a tricky spot, with the jobs market softening, stubborn price pressures, and divisions among Fed officials. Recall that the Fed’s latest SEP signals just one rate reduction this year, while money markets are pricing slightly more than two cuts by year-end (approximately 60 bps via OIS pricing).

If data come in strong today, this could provide a tailwind for yields and the USD, validating the Fed’s rate projections and affording the bank some breathing room to focus on inflation. Conversely, softer prints would accentuate labour market fragilities and weigh on yields and the greenback, effectively endorsing market expectations.