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On August 20th, Federal Reserve Chairman Daly stated that rising long-term yields are a global issue that has weakened their indicative role in Fed policy signals, and he believes the Feds credibility is not at risk. Short-term yields show the market understands the Feds response mechanism, and the Feds policy is in good shape; he sees no evidence of a need for an early rate hike. He expects the inflationary shock to gradually subside, therefore he is "very supportive" of the Fed keeping rates unchanged in July. However, he cautioned against the cumulative effect of multiple inflationary shocks, although he is looking for more worrying signs of inflation, but has not yet seen any. Recent employment and inflation data have not changed the outlook, and he does not currently believe the labor market will drive inflation. Rising bond yields have not sent a policy signal, and it is too early to discuss the pattern of US Treasury issuance. The Fed will find a way to achieve its policy objectives. The Fed will continue to fulfill its responsibilities, regardless of what actions the Treasury takes.Federal Reserves Daly: The labor market is stable; my focus is on inflation.Federal Reserves Daly: Two weaker data points did not make the inflation situation clearer.Federal Reserves Daly: We are still in a good position to look at the data.August 20th - Initial jobless claims in the U.S. fell slightly last week, remaining near historically low levels, indicating relatively small-scale layoffs in the labor market. Data released by the U.S. Department of Labor on Thursday showed that initial jobless claims fell by 6,000 to 206,000 in the week ending August 15th. The median forecast from economists surveyed was 210,000. Meanwhile, continuing jobless claims rose to 1.8 million last week.

In a risk-on environment with a weaker US dollar, WTI consolidates weekly losses above $83,000

Alina Haynes

Sep 09, 2022 17:17

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The price of WTI crude oil is higher for the second day in a row while paring the weekly losses at the eight-month low on Friday during the Asian session. However, by the time of publication, the black gold has reached a new intraday high of around $83.50.

 

Recent news reports from the US Treasury Department regarding the oil price cap appear to have helped drive up energy prices together with stronger sentiment and a weaker US dollar. According to the US Treasury source, "the oil price cap should be set above the marginal production cost, taking into account past Russian oil prices."

 

In other news, stronger sentiment and slow US Treasury yields cause the US Dollar Index (DXY) to fall intraday by 0.55%, to 109.05 at the latest. It's interesting to see that after a solid day, the US 10-year Treasury yields are still stuck around 3.32%, while the S&P 500 Futures tracks Wall Street's gains at approximately 4,020.

 

Recent market sentiment appeared to be aided by remarks made by US Treasury Secretary Janet Yellen, which suggested that trade relations between the US and China were set to improve. The market's attitude also appeared to have been aided by recently stronger US statistics and expectations that global central bankers will be able to offset the shock caused by inflation with a comprehensive strategy and higher rates. The Wall Street Journal (WSJ) article, on the other hand, raises some concerns about the future of China's technological enterprises and casts some doubt on the optimism.

 

A price document examined by Reuters on Friday revealed that Kuwait has decreased the official selling prices for its oil grades for the month of October from the previous month. Before the present program ends in October, US Energy Secretary Jennifer Granholm said the administration of US President Joe Biden is considering whether additional releases of crude oil from the country's emergency stockpiles are necessary. Prior to that, a Department of Energy official reportedly told Reuters that the White House was only considering releasing the 180 million barrels from the US Strategic Petroleum Reserve (SPR) that the president had already stated.

 

It should be highlighted that the recent decline in China's inflation data, coupled with the hawkish central bank activities, presents a challenge to oil purchasers. Both China's Producer Price Index (PPI) and Consumer Price Index (CPI) show unfavorable results for August. However, compared to 2.8% market expectations and 2.7% in the prior year, the headline CPI declined to 2.5% YoY, and the PPI fell to 2.3% from 3.1% projected and 4.2% in the preceding year.


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