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While financial markets are likely to be significantly impacted by the illiquidity resulting from the American Thanksgiving holiday today, the end of the week is by no means devoid of fundamental event risk with implications for global financial markets.   European markets are trading in positive territory midway through their session, though key economic data points out of the region were released to mixed fanfare earlier this morning.   Private loan growth and Money Supply figures both came in slightly lower than economists had forecast, yet both measures are well off the lows seen at the beginning of the year and appear to be moving in the right direction.   Though loans to consumers and businesses in the private sector are still shrinking on a y/o/y basis, the pace of decline has improved in an expedited manner since May, and now just stands at -1.1%.

That being said, the positive trajectory of lending in the private sector has yet to translate through to the broader currency-bloc, with disinflationary pressures still prevalent in the larger economies.  Spain saw their CPI figures for the month of November drop further into deflationary territory with prices decreasing by 0.4% on an annualized basis, while the flash headline CPI reading for Germany illustrated consumer prices slowed from an annualized increase of 0.8% in October to 0.6% in November.   The soft inflation readings in Spain and Germany do not bode well for the aggregate reading from the overall zone tomorrow, and will put further pressure on the ECB to provide more accommodative stimulus measures in the near future.  Expectations are for the annualized print to slow to an increase of only 0.3% in November, with a miss to the downside increasing the probability there could be an expanded range of assets approved for purchase at the November ECB meeting.  The Euro is trading with an offer tone against the USD but the ferocity of the move has been muted ahead of tomorrow’s data, with the pair backing away slightly from the 1.25 handle.

The other key event for market participants who aren’t indulging in Turkey today is the conclusion of the OPEC meeting, and whether the group can come to a consensus on an agreeable level of oil supply.   There have been mixed views from the group leading up to the meeting, with Venezuela hoping to reduce the output target by 2 million barrels per day from the current level of 30 million barrels per day, while the Saudis continue to take the stance the market will be able to stabilize without any changes to production targets.   The conflicting views from within the different factions of the group has raised concern the most likely outcome is a fragmented meeting whereby the organization can’t get all members on the same page and hence do not change the production cap.   The Saudis have their own political rationale for wanting to keep prices lower in an effort to put the squeeze on Russia and Iran, which hampers their motivation to act as a swing producer in an effort to support prices and boost oil revenues for those countries it is in political opposition towards.

The fragmentation of the group has seen oil prices slip further as production cuts seem less plausible, with front-month WTI changing hands in the mid-$72/barrel range.   The Loonie hasn’t responded to oil’s latest tumble yet, with USDCAD trading essentially unchanged from yesterday’s close.   That being said, the official statement after the conclusion of the OPEC meeting and tomorrow’s Q3 GDP numbers pose significant risks for Loonie traders, compounded by the fact liquidity will be sparse given the Thanksgiving holiday and month end.

Further reading:

German HICP inflation falls to 0.5% in November

ECB tentatively edges closer to QE in 2015; more EUR weakness likely