COMMODITIES: Gold Down Ahead of Jackson Hole as Oil Rises

US gas continued to fall sharply as supply looks likely to rise going forward with the weather turning milder, while European prices were moderately higher as it remains dependent on global developments as it builds inventory ahead of year end.

• US natural gas fell 2.0% to $3.26 on Tuesday as the weather across much of the US is expected to be milder at the start of August. This followed a 6.9% drop on Monday following Baker Hughes data showing nine extra gas rigs signalling an upcoming increase in output at a time of above average inventories.
• Europe remains vulnerable to supply disruptions as it refills storage ahead of winter but progress has been solid. Prices rose 0.5% to EUR 33.33 off the intraday low of EUR 32.90.
• There have been strong European LNG imports with the IEA expecting them to reach a record this year. They have been a major driver of increasing storage levels to around 65% (Bloomberg).
• Strong US LNG supply has been a significant contributor to Europe and has helped to offset increases in gas demand from Egypt and Japan. Cooling demand in southern Europe has also added to global gas consumption.
• The IEA believes that an increase in global gas supply will keep prices contained and drive stronger demand next year, especially in Asia. 

ACGBs (YM flat & XM +1.0) are slightly stronger. 

• US tsys continued to rally, with yields 3bps lower. The 10- and 30-year rates at 4.344% and 4.917%, respectively.
• Asked if he (Pres Trump) believes Powell should resign: “I think he’s doing a bad job, but he’s going to be out pretty soon anyway. In eight months, he’ll be out. I call him ‘too late’, he’s too late all the time. He should have lowered interest rates many times.”
• Cash ACGBs are little changed with the AU-US 10-year yield differential at -5bps.
• The bills strip is little changed.
• RBA-dated OIS pricing is slightly softer across meetings today. A 25bp rate cut in August is given a 100% probability, with a cumulative 66bps of easing priced by year-end.
• Today, the local calendar will see the Westpac Leading Index.
• Yesterday, the AOFM announced the issue by syndication of a new 4.25% 21 October 2036 Treasury Bond. The issue will be of a benchmark size. Initial price guidance for the issue is a spread of 3.5 to 6.5 basis points to the implied bid yield for the primary ten-year Treasury Bond futures contract. The issue is expected to be priced today.

US President Trump has posted via Truth Social that the US and Japan have reached a trade/investment deal. The full post is outlined below, Trump states that Japan will invest $550bn into the US, while Japan will also open up access to cars, agriculture exports from the US. Japan will pay a 15% reciprocal tariff to US Trump notes. This is lower than the 25% rate which had been threatened. USD/JPY initially moved lower on the announcement but this was short lived. 

• "Donald J. Trump @realDonaldTrump: We just completed a massive Deal with Japan, perhaps the largest Deal ever made. Japan will invest, at my direction, $550 Billion Dollars into the United States, which will receive 90% of the Profits. This Deal will create Hundreds of Thousands of Jobs — There has never been anything like it. Perhaps most importantly, Japan will open their Country to Trade including Cars and Trucks, Rice and certain other Agricultural Products, and other things. Japan will pay Reciprocal Tariffs to the United States of 15%. This is a very exciting time for the United States of America, and especially for the fact that we will continue to always have a great relationship with the Country of Japan. Thank you for your attention to this matter!"