Open: New York Session | Forex, Metals, Oil, Agriculture July 30, 2021

download

Currencies

Headline inflation driven by the oil price, core inflation continues to be slow Euro-area inflation was 2.2% in July (1.9% in June). “Regional currencies have started marginally weaker against the Dollar early Friday morning, while crude remained strong and could keep appreciation bias limited,” Reliance Securities said in a research note. At 17:32 GMT, the Advance GDP Price Index for the quarter rose to 6.0% against the forecasted 5.4% and supported the U.S. dollar and capped further gains in gold.
At the interbank foreign exchange, the domestic unit opened at 74.30 against the dollar, then inched higher to 74.27, registering a gain of 2 paise over its previous close. The Euro-area inflation was driven by the oil price What will be the second-round effects of the (temporarily) high inflation numbers in Germany? The Australian Dollar continues to hover at support-turned-resistance in the 0.7384-0.7413 area, a barrier reinforced by a falling trendline defining the down move since mid-June.
EUR/USD price forecast remains bullish amid ongoing weakness in the U.S. dollar and the renewed strength in Euro. The Advance GDP Price Index for the quarter surged to 6.0% against the anticipated 5.4% and supported the U.S. dollar. Core inflation declined as expected to 0.7% (0.9% in June) which indicates that more general price pressures in the Euro-area continue to be low. At 12:55 GMT, German Unemployment Change dropped to -91K against the forecasted -29K and supported the single currency Euro that pushed EUR/USD higher.

Metals

Excerpts:Have high steel prices led to record prices?More than the high prices, the profit was driven by complete turnaround in our overseas subsidiaries. In domestic markets, gold prices were trading flat in early trade today tracking a muted trend in the international spot prices. The precious metal gold has already tested my target level mentioned in the gold price forecast, July 29. less Gold prices closed at $1830.30 after placing a high of $1832.60 and a low of $1807.20.
On Friday, the gold price forecast remains a bit bearish below the 1,833 level, as bulls may start taking profit in overbought metal. Gold prices are trading down 0.2% at Rs 48,170 per 10 grams. Like last year, steel demand increased from 12 million tonnes in June quarter to 24 MT the following quarter. In international markets, spot gold was steady at US$ 1,827.3 per ounce, having hit its highest since 15 July at US$ 1,832.4. The daily macroeconomic data release from the U.S. came in worse than expected and supported the upward momentum in the precious metal gold.
The upturn in steel prices has come when doubling of its Dolvi plant to 10 MTPA is close to completion.

Oil

The main reasons behind high numbers are of course temporary: the oil price rebound, the base effect from the VAT reduction a year ago and food price volatility. The company suspended purchases early last year as the pandemic cut oil demand. That is exactly what it will soon need, though, to prevent one of the world’s largest oil pipeline systems from sinking into melting permafrost. Inflation continues to be dominated by the oil price rebound and core inflation declined to 0.7%.
Billions of dollars of oil and gas infrastructure has been built on frozen ground. Oil prices were in the red. Recent wildfires, floods and droughts across the world are bringing the spotlight once again to the contribution that the oil-and-gas industry has made to climate change. A drought can impact oil production too. Foreigners are always shocked that some of Australia’s biggest coal and liquid natural gas ports are on the lagoon of the GBR. There is no shortage of ways in which the oil-and-gas industry is impacted by climate change.

United States

Powell admitted that it wasn’t the “kind of inflation the Fed was looking for” but that they had to consider the rising inflation from a risk management perspective. At the press conference this week Powell also dodged more than five chances to say that the Fed had not reached its inflation target, yet refrained from it. BEFORE THE BELL Wall Street futures fell, while investors turned to a key inflation report for cues on the pace of a domestic economic recovery.
The Fed’s favored inflation gauge is expected to put price growth at 3.7 percent on-year, the highest in three decades.
That may sour sentiment as markets ponder the Fed policy challenges inherent to such a scenario, offering USD renewed support. This is a pretty material change of wording from Powell, even if he sticks to his transitory narrative (Fed review: One out of two targets met? Nasdaq Futures are trading down by 194 points (down 1.3%) while Dow Futures are trading down by 122 points (down 0.4%). He s certainly correct that one big difference between Trump and President Joe Biden is that Biden stayed focused on his legislative goals, while Trump was easily distracted.
Of course, the starting point for inflation in Germany is much weaker than in the US. Biden, to his credit, has built a competent team of professionals from the chief of staff down, where Trump was unusually bad at personnel decisions.

Europe

After the recent dovish pivot from the ECB, we have also seen a slight dovish repricing of the Norges Bank outlook, which is unjustified in our view. For example, our 4.5% growth forecast for 2021 assumes 3% q/q growth in Q3 and the ECB projection at 2.8% is not much less optimistic. The ECB considered that price stability was best maintained by aiming for a 2% inflation target over the medium term. By now, I have built up excellent skills and experience in analyzing macroeconomic and political developments in Europe, the Eurozone and Germany, including ECB watching.
This was higher than in our forecast (1.5%) and the ECB staff June projections (1.4%). Main focus: Europe, Eurozone, Germany and ECB.

0