GOLD: Gold Stronger On Fed Uncertainty
Gold rose on news that President Trump was removing Fed Governor Cook and then added to these gains ...
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OIL: Muted Crude Response To EU-US Trade Deal
Oil prices were down over a percent on Friday as fears over upcoming trade negotiations added to pressures from ample supply. However, over the weekend the EU reached an agreement with the US for flat tariffs of 15% except steel & aluminium which still face 50% and aircraft & parts that will have no duty. The EU agreed to buy $750bn of US energy over the remainder of President Trump’s term and invest $600bn in the US. Oil’s reaction to the news has so far been muted.
- WTI fell 1.5% to $65.07/bbl after touching $65.00. The benchmark was down 1.5% on the week but still up 1.9% in July. It has started today slightly higher at $65.18 following news of the EU-US trade deal. Talks with China to extend current tariffs begin Monday.
- The sharp decline since June 23 highlights scope for an extension lower with the 50-day EMA at $64.75 a key support level to watch.
- Brent was down 1.1% to $68.39/bbl just off the low of $68.31. It was 1.3% lower on the week but is still 2.5% higher this month. A bearish theme continues and the rise in July appears corrective. Initial support is at $65.92, 30 June low. Initial resistance is at $72.66.
- In terms of supply, Baker Hughes reported a larger-than-expected drop in US oil rigs of 7 to 415.
- Also, OPEC is scheduled to meet on August 3 to decided output levels. The group has increased output by more than 400kbd consistently over each of the last few meetings. The US decision to allow Chevron to resume production in OPEC-member Venezuela is unlikely to materially impact the outcome of the group’s meeting.
CHINA: Preview: Official PMIs out This Week
- This week sees the release of the official China PMIs for July.
- The manufacturing PMI has printed below 50 for the last three months and may struggle to rise above 50 again as summer holidays begin and no sign of policy changes that will support the state owned enterprises.
- The services PMI has maintained an above 5 result consistently and could see a modest uptick on summer holiday spending.
- Soon after that S&P Global Manufacturing PMI (formerly known as the CAIXIN) will be released and it is anticipated that manufacturing in the private sector could moderate but remain in expansion.
AUSSIE BONDS: Modestly Weaker, Q2 CPI On Wednesday
ACGBs (YM -0.5 & XM -1.5) are slightly weaker after a subdued close to last week for US tsys. The US 2-year was 1bp cheaper at 3.92%, with the 10-year 1bp richer at 4.39%.
- Cash ACGBs are 1bp with the AU-US 10-year yield differential at -3bps.
- The bills strip is slightly weaker, with pricing -1 to -2.
- RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut in August is given a 92% probability, with a cumulative 56bps of easing priced by year-end (based on an effective cash rate of 3.84%).
- (Bloomberg) -- Iron ore shipments from Australia's largest bulk-export terminal swelled to a record in June, in a sign of ample seaborne supplies just as concerns mount about the outlook for Chinese demand.
- "China and the US will pause tariffs for another 90 days, the SCMP reported." - BBG
- Locally, the Australian Q2 CPI on Wednesday will be closely watched and could provide a catalyst for some movement. Worth keeping in mind we are approaching the corporate month-end so there could be a demand for some USD's today but more likely that flow will be done tomorrow.
- This week, the AOFM plans to sell A$1000mn of the 2.25% 21 May 2028 bond on Tuesday and A$1200mn of the 2.75% 21 June 2035 bond on Friday.
