AMERICAS OIL: Strong Jan Rally Pauses Ahead of Trump’s Inauguration
Strong Jan Rally Pauses Ahead of Trump’s Inauguration: Saxo Bank Commodities Weekly
• The bank notes a broad commodities rally continued this week, before some profit-taking emerged ahead of Monday’s inauguration speech.
• The Bloomberg Commodity Index reached a 25-month high with all three sectors showing gains.
• In their recently published Q1 2025 outlook, Saxo paints a broadly bullish outlook for commodities.
• Much focus is on energy, given strong winter demand at a time when supply from Russia is facing challenges amid increased sanctions.
• Their main commodities forecasts are generally geared toward higher prices with crude oil staying mostly rangebound within a $65-$85 range. The short-term risk is skewed to the upside.
• While the strong start to January has brought us close to the upper targets, it is too early to make revisions given elevated near-term uncertainty. There may also have been commodity hoarding ahead of potential tariffs, highlighting a risk that the demand seen has not been driven by real end user demand.
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US DATA: Second Largest Current Account Deficit Since 2008
- The current account deficit was once again larger than expected in Q3 at $310.9bn (cons $287.1bn) after an upward revised $275bn (initial $266.8bn) in Q2.
- It leaves a deficit of 4.2% GDP in Q3, the largest since 1Q22 and before that 2008, after a sharp increase from the 3.8% in Q2, 3.4% in Q1 and 3.1% in 4Q23.
- It’s a marked level difference compared to the 2% GDP deficits averaged in the years leading up to the pandemic, and is also currently coinciding with fiscal deficits to the tune of 6-7% GDP.
- The latest quarterly deterioration was broad-based: the goods deficit increased from 4.1% to 4.2% GDP, the investment income balance shifted from 0.0% to a deficit of 0.1% GDP and the secondary income deficit (i.e. transfers) shifted from 0.6% to 0.8% GDP.
- Compared to pre-pandemic levels though, the main difference has been the dwindling in the primary income balance, from surpluses of 1-1.5% GDP to a second consecutive quarterly deficit this time at 0.2% GDP. Prior to Q2/Q3 this year, the primary income balance was last in deficit fleetingly in 1998.
- Investment income is the key driving force here, likely as US assets outperform those overseas.
CANADA DATA: Oct Employment Insurance +4.7% YOY
- Employment insurance recipients +0.1% MOM in Oct.
- StatsCan notes that's in line with little change in employment in the Oct. Labour Force Survey.
- Manufacturing and utilities led the decline in number of regular EI beneficiaries in Oct.
- EI recipients +4.7% YOY led by art, culture, recreation and sport.
- Weakness in the labor market has been evident with the unemployment rate 6.8% in Nov., highest since 2017 excluding the pandemic. BOC has said economic slack a big reason it can keep cutting interest rates.
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