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According to the Wall Street Journal, sources say Mexico is pushing for lower auto tariffs in the USMCA negotiations.Japans corporate goods price index rose 7.2% year-on-year in July, below the expected 7.4% and the previous reading of 7.10%.Japans corporate goods price index rose 0.1% month-on-month in July, below the expected 0.60% and the previous reading of 0.40%.Futures News, August 13th - According to foreign media reports, Chicago Board of Trade (CBOT) soft red winter wheat futures closed sharply higher on Wednesday, with the benchmark contract rising 3.6%, mainly reflecting the ongoing conflict between Russia and Ukraine, which has disrupted grain exports from the region. Ukrainian President Zelensky stated that this "unique operation" targets the last major stronghold of the Russian Black Sea Fleet. The ongoing conflict between the two countries continues to restrict agricultural exports from the region and has also caused some commodity prices to fluctuate wildly during the conflict.On August 13th, a research report from CICC stated that the seasonally adjusted CPI in the US rose 0.1% month-on-month and 3.4% year-on-year in July, while core inflation rose 0.2% month-on-month and 2.5% year-on-year, both in line with market expectations. Energy prices continued to decline, but international oil prices have rebounded since August, increasing uncertainty about future energy prices. Regarding core inflation, commodities were relatively strong while services were relatively weak, especially with the continued rise in prices of information technology products such as computers and software, reflecting that the supply-demand mismatch caused by the expansion of AI capital expenditure is gradually being transmitted to the consumer side. We believe that US inflation may have entered a new phase, with its driving force gradually shifting from supply shocks such as tariffs and oil prices to demand expansion driven by AI investment, and the duration of inflation may be correspondingly prolonged. For the Federal Reserve, this data alleviates the pressure for short-term interest rate hikes, but demand-pull inflation requires more attention from policymakers than supply-push inflation.

WTI crude oil drifts above $80.00 amidst a US Dollar rebound and supply shortage concerns

Alina Haynes

Apr 10, 2023 14:16

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In the early hours of Monday, purchasers of WTI crude oil struggled to maintain the price above $80.70 as risk aversion and hawkish Fed forecasts bolstered the US Dollar. However, threats to Oil supplies, primarily emanating from China and OPEC+, appear to keep purchasers of black gold optimistic.

 

US Dollar Index (DXY) reverses a four-day downtrend near 102.25 despite the inability of US Treasury bond yields to recover due to recession concerns. However, US 10-year and 2-year Treasury bond yields remain under pressure near 3.37 percent and 3.95 percent, respectively. In doing so, the benchmark bond coupons extend the previous day's losses and illustrate the market's flight to protection in response to concerns of an economic decline.

 

In spite of this, the recent disappointing US data reignite concerns of a recession in the world's largest economy and challenge the optimists in the energy sector. However, the positive US Nonfarm Payrolls (NFP) data enabled Fed hawks to return to the table and renew demands for a 0.25 percentage point rate hike in May. The same constrains the value of the US dollar and stimulates demand for WTI crude oil.

 

On the other hand, geopolitical concerns surrounding China, particularly after the dragon nation's military exercises near Taiwan, combine with last week's unexpected OPEC+ production cut to keep Oil purchasers optimistic.

 

China's willingness to defend the global economy through robust monetary and fiscal easing at home also enables Oil purchasers to maintain optimism in the face of optimism among the world's largest Oil consumers.

 

The Easter Monday holiday in spot markets may limit Oil price movements, but the investors appear to be out of steam, so US inflation and Fed Minutes will be closely monitored for signs of a pullback.


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