Daily Outlook

The Australian dollar continues to hold as Friday’s much anticipated NFP result failed to reignite US dollar strength. Despite Average hourly earnings and Non-farm employment change beating expectations, the unemployment rate rose to 5.0% (an increase of 0.1%). US Manufacturing also outperformed market expectations.  This was not enough to suppress recent strength in the Australian dollar as it continues to trade around the 0.7660 level. Tomorrow’s RBA meeting could provide scope for AUD jawboning however analysts expect rates to remain on hold.

Oil continues its slide this week as Russia posts its highest recorded production in 30 years. Russian oil output continues to rise, hitting 10.91m barrels per day in March, amid the global rout in oil prices. Rising production levels will further complicate production freeze negotiations in the upcoming Doha meeting on April 17^th. WTI and Brent are currently trading at $36.30/bbl and $38.25/bbl, down from their yearly highs of $39.83/bbl and $42.50/bbl.

As inventories continue to swell, the market looks to bankruptcies in the U.S shale industry for validation of an oil market recovery. More than 50 North American oil and gas producers having entered into bankruptcy since the beginning of 2015. Although these firms account for only 1% of U.S output, bankruptcy has failed to halt their production. Creditors perceive continued production as an opportunity to recover some of the losses incurred. Furthermore, as operating wells are more valuable than their idle counterparts, bankrupt firms looking to offload assets must continue to drill. Despite the continued pressure on major oil producers to stabilize oil prices, given the current market conditions pressure will continue to mount to the downside.