COMMODITIES: WTI Futures Maintain a Softer Tone Following Reversal From Highs
WTI futures maintain a softer tone following the reversal from Monday’s high. Support to watch is at the 50-day EMA, at $64.52. It has been pierced, a clear break of it would signal scope for a deeper retracement. This would expose $58.87, the May 30 low. On the upside, initial resistance to watch is $71.20, the 50.0% retracement of the Jun 23 - 24 high-low range. Key resistance is at $78.40, the Jun 23 high. The trend condition in Gold remains bullish and the latest pullback is considered corrective. Note that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Resistance at $3435.6, the May 7 high, has recently been pierced. A clear break of this level would strengthen the uptrend and open $3500.1, the Apr 22 all-time high. Initial key support to monitor is $3289.4, the 50-day EMA.
- WTI Crude up $0.04 or +0.06% at $64.94
- Natural Gas down $0.08 or -2.26% at $3.329
- Gold spot up $15.73 or +0.47% at $3348.59
- Copper up $8.45 or +1.7% at $505.6
- Silver up $0.22 or +0.59% at $36.4603
- Platinum up $49.48 or +3.65% at $1401.05
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GERMANY: Exports Could Fall Up To 4% In 50% US Tariff Scenario - IFO
German exports could fall by up to E60bln or around 3-4% under a 50% US tariff scenario according to IFO calculations. "A significant proportion of German export business in the USA could become unprofitable”, IFO comments.
- Note that US rhetoric on trade matters with the EU has softened since last week's 50% tariff threat by President Trump, with the threatened start date kicked back from Jun 1 to Jul 9.
- For reference, E60bln would be around 1.4% of German 2024 GDP. Initial IFO calculations following the April 2 'Liberation Day' announcements estimated a negative 0.3pp impact on German 2025 GDP (based on the 20% EU tariff rate planned then).
- Net exports added 0.9pp to quarterly GDP growth in Q1 in Germany ('Q1 Final GDP Comparatively Bright, Potential Growth Muted' - MNI, May 23) although it did follow -1.1pp drags in both 3Q24 and 4Q24, driven by a longer-term downtrend of German exports to China (in place since 2022). With a Y/Y net export contribution of -1.4pps as of Q1, the German economy remains vulnerable to a deterioration in external sector conditions.
US-EU: BBG-EU Focuses Strategy On Key Sectors As Trump Delays Tariff Escalation
With US President Donald Trump confirming a delay to the implementation of 50% tariffs on EU imports, from 1 June to 9 July, Bloomberg reports that the European Commission, which leads trade negotiations on behalf of all EU member states, "will focus its new strategy on critical sectors as well as tariff and non-tariff barriers,[...]. The Commission will also link its approach to addressing regulatory barriers with its plans to simplify rules."
- Trade Commissioner Maros Sefcovic, "will lead political negotiations on industries such as steel and aluminium, automobiles, pharmaceuticals, semiconductors and civilian aircraft, [...]. Those talks will happen in parallel with the technical discussions on tariffs and non-tariff barriers."
- The delay avoids the worst-case scenario of 50% tariffs followed by significant EU retaliation for now at least, but the risk of escalation remains. The EU already has tariffs focused on E21B of US goods ready to go in response to the initial Trump tariffs on steel and aluminium. These levies are geared towards hitting industries and products that are centred on Republican-run states in the US in order to put maximum pressure on GOP leadership and the White House.
- A further E95B in tariffs is being put together in response to the initial 20% 'reciprocal' tariffs. The raising of this rate to 50% could see the EU's retaliation escalate further.
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