AMERICAS OIL: WTI crude is slightly firmer today, holding onto Friday’s 2% gains
Jun-09 11:21
WTI crude is slightly firmer today, holding onto Friday’s 2% gains ahead of US-China trade talks amid increased risk appetite as tariff fears eased. Crude is trading near the top of its recent range since mid-May amid low volatility recently.
- US-China trade talks are due to take place in London on Monday as the market watches for progress amid concern that increased protectionism would weigh on global energy demand.
- Data last week showed no deterioration in the US labour market in May despite heightened trade uncertainty.
- China crude oil imports rose fell to 46.6m tons in May as maintenance at refiners increased but year to date volumes were up 0.3% on the year. Oil product exports year to date fell 11.7% year on year.
- Supply developments remain in focus as OPEC normalises output although increased quotas has yet to translate into big gains in actual output, according to Morgan Stanley.
- Geopolitical concerns over Russian and Iran and tight near-term fundamentals continue to support backwardation at the front of the curve but with the market in contango beyond Jan26 amid oversupply concerns.
- US diesel and gasoline cracks are modestly higher today ahead of the summer driving season propelling gasoline demand and resilient economic indicators buttressing distillate demand.
- WTI JUL 25 up 0.3% at 64.79/bbl
- US gasoline crack up 0.1$/bbl at 22.67$/bbl
- US ULSD crack up 0.4$/bbl at 25.10$/bbl
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MACRO OUTLOOK: US PPI/Retail Sales And Powell Follow On Thursday [2/2]
May-09 20:17
- Core PCE implications will then be watched closely in Thursday’s PPI report, and we expect with additional focus on portfolio management after last month’s huge upward revision to February.
- Retail sales, whilst only reported in nominal terms, will offer a keenly awaited look at consumer behavior.
- Real spending moderated to 1.8% annualized in Q1 after 4.0% in Q4 despite likely tariff front-running, with April a good test of how much discretionary spending was pulled forward.
- Finally, Powell provides “Opening Remarks” at the Second Thomas Laubach Research Conference, although he’s allotted twenty minutes so there is scope for more substantive remarks than you’d usually expect. His message at Wednesday’s FOMC press conference was one firmly of being in no hurry to cut rates amidst huge uncertainty. He also appeared to put more weight on hard data over soft indicators that appear more stagflationary in nature.
MACRO OUTLOOK: US CPI Offers Look At April Tariff Distortions on Tuesday [1/2]
May-09 20:15
- The week’s US data calendar is highlighted by CPI inflation on Tuesday although PPI inflation and retail sales reports on Thursday are in close second. All three releases are going to be important, offering further hard data for April in the first month under reciprocal tariffs. What’s more, PPI and retail sales are followed by Fed Chair Powell just ten minutes after their release (more on that below).
- Core CPI inflation is seen accelerating to 0.3% M/M in April, with six unrounded estimates we’ve seen to date averaging 0.27% M/M.
- A potential for a ‘low’ 0.3% aside, it’s still likely a swift acceleration from a particularly soft 0.06% M/M in March which was in large part down to surprisingly abrupt declines in lodging away from home (-3.5%) and airfare (-5.3%) prices.
- This lodging weakness carried over to core PCE inflation back in March, at just 0.03% M/M after a particularly strong 0.50% M/M in February in a large wedge with core CPI at 0.23% M/M.
- Markets currently price a next Fed cut with the September FOMC meeting.
USDCAD TECHS: Pressuring Resistance
May-09 20:00
- RES 4: 1.4296 High Apr 7
- RES 3: 1.4111 High Apr 4
- RES 2: 1.4041 50-day EMA
- RES 1: 1.3943 High May 9
- PRICE: 1.3930 @ 16:06 BST May 9
- SUP 1: 1.3751 Low May 6
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
USDCAD has recovered from its recent lows. Despite the recovery, the trend condition remains bearish and short-term gains are considered corrective. A fresh cycle low on Tuesday reinforces the bearish theme. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Note that moving average studies are in a bear mode position, highlighting a dominant downtrend. Key resistance is seen at 1.4041, the 50-day EMA.
