more to come
China will be out on Friday September 29 for a national holiday, and then will also be out on Monday to Friday (inclusive) the following week (October 2 – 6).
ANZ comments on oil implications:
Goldman Sachs says that while a sustained climb in oil prices could slow consumption and economic growth it will be a “manageable headwind” for the U.S. economy.
The note from GS economists goes on to discuss four key reasons why the Goldman team isn’t too concerned about the surge in oil prices. In summary:
“Oil prices have risen by $20 per barrel — compared to +$40 in the first half of 2008 and +$45 in the first half of 2022 — and our forecast of retail gasoline prices using futures and wholesale markets indicates that most of the rebound has already occurred,”
“The Fed should worry about the implications for price stability only if higher oil prices contribute to a de-anchoring of inflation expectations … We are relatively unconcerned about this risk and we do not expect the recent oil move to meaningfully boost consumer inflation expectations.”
Chevron chairman and CEO Mike Wirth spoke in a US TV interview, CNBC, on Monday.
He pithily wrapped up what’s driving the price higher:
Said US oil is going above $100/bbl, higher for non-US oil.
Brent update:Full Article
More to come.
US major stock indices closed near highs for the session. The gains come despite higher yields in the US where the 10 year yield rose nearly 11 basis points and the thirty-year was of 14 basis points.
Both the broader S&P and NASDAQ index have been down for 3 consecutive weeks. Starting the week off with gains as a positive development:
Some winners today included:
Some losers today included:
It’s a light data agenda ahead, but there should be some interesting items from the Reserve Bank of Australia.
And from the Reserve Bank of Australia:
I’m not sure what to expect from this! Should be something of interest though. There will be more on inflation from Australia on Wednesday local time – the monthly inflation report for August 2023.Full Article
Crude oil prices remained settled at $89.68 today. That was down $-0.35 or -0.39%. The high today reached $90.83. THe low was at $89.03.
Russia lifted some export bans, but restrictions on gasoline and high-quality diesel persist. Chevron plans to increase its oil output in Venezuela to 200k BPD by early 2024.
Technically, looking at the hourly chart, the price action today was above and below the near-converged 100 and 200-hour moving averages (blue and green lines on the chart below).
The 100 hour moving average is currently at $90. The 200-hour moving average is currently at $90.10. Those moving averages will define the short-term bias. Staying more bearish. Moving above is more bullish.
Moreover, the price is trading in between trendlines on the top and bottom side as the price consolidates since peaking on September 19.
On the downside the next target is at:
On the topside, move above the 100/200 hour MAs and the
The third quarter is winding down and that beckons a look at what has unfolded so far in the forex market in 2023. At the top of the FX-trading charts is long GBP/JPY. It’s a classic carry trade and it worked as well as ever this year as a global tightening cycle got underway.
Adding fuel to the fire was a series of overshoots in UK inflation. That supercharged this trade in June and has kept it near the highs.
What was less-predictable was the stubbornness of the Bank of Japan to holding rates unchanged even as inflation rose. The big risk to this trade all year long has been the possibilty of a BOJ change. Though there has been a tweak to YCC, rates (and real rates) are still deeply negative. That’s made every dip a buying opportunity.
Zooming out, this trade is a reminder that there is nothing new under the sun and that during hiking cycles, it’s rate differentials that drive the currency market. It’s also worth pointing out that the Bank of England didn’t hike this month and there is only about a 50/50 chance of a single further hike priced into the market (a far cry from when all the talk was about +6% rates).
Deutsche Bank argues that the final quarter of the year may feature a retracement, in part because Japanese inflation is proving to be stubborn.
Simply, at these levels it’s hard to be anything but upbeat on yen – the
real TWI is at a 50-year low. On our preferred DBeer framework it’s 20% cheap –
since 1996 only one other currency has got to this level (Figure 16). And it’s not like
JPY is persistently cheap on this metric (as it is with PPP for example) – it’s been quite
expensive at times in the past (eg, 2007-2012). The cheapness seems to have had
a real impact – Japan’s trade deficit from last year has been erased as goods exports
outperform Asian peers (flat instead of down heavily year-on-year), while the
tourism boom is helping on the services side.
The trigger for selling GBP/JPY is likely to be a period of falling stocks along with falling Treasury yields, something that’s rarely happened this year.Full Article
I don’t get the sense that the public is in any mood for a US government shutdown, especially after the ridiculous debt ceiling theatrics in May but I will never underestimate the stupidity of politicians.
Hundreds of thousands of US government workers will be furloughed starting on Oct 1 if Congress fails to pass a funding bill. It would also mean that US economic data publication is halted indefinitely.
shutdown would be credit negative for the US sovereign,” Moody’s, which
has a triple-A rating for the U.S. government, said in a statement. “In
particular, it would demonstrate the significant constraints that
intensifying political polarization put on fiscal policymaking at a time
of declining fiscal strength, driven by widening fiscal deficits and
deteriorating debt affordability.”
The longer the shutdown lasts, the more negative it would be, Moody’s said.
Fitch downgraded the US in August and said one of the reasons was the debt ceiling drama. Moody’s is the only major credit ratings agency that has a top credit rating for the US.Full Article
In the view of Deutsche Bank, we’re on the cusp of a turning point in the forex market as central banks shift to neutral from hiking.
“This big shift is seeding the ground for fresh
trends,” Deutsche Bank FX analysts write. “We think it will be relative growth differentials and the differentiated impact
of monetary tightening across the globe that will be important new FX drivers
The main theme is that the trades that work into year end will be retracements of what’s worked so far this year, aside from ongoing CNY weakness.
Here are their 10 themes:
For the euro, they note that the trading range this year so far is the narrowest on record. That sets the stage for a protracted breakout, though they’re not yet sure in which direction.
The main reason EUR/USD has failed to break higher this year is the relative
outperformance of US growth to Europe. We see this growth divergence as likely
to have peaked with forward-looking indicators on bank credit conditions, among
others, improving in Europe but still deteriorating in the US. We also see the
pessimism around Europe’s external competitiveness as exaggerated with the
current account surplus returning to its highs. Still, it is the Fed that remains the
most important catalyst for a move lower in the dollar and while the US inflation
picture is looking increasingly benign it is the outperformance in growth that is
helping the USD. We stay neutral.
In the bigger picture, DB is carefully watching the trajectory of US growth. They have long noted how a Fed easing cycle
on the back of a soft-landing is the most-bearish dollar outcome possible but even with inflation worries fading, the market is hesitating because US growth is so resilient.