TRADING SIGNALS: JULY INFLATION IN THE USA
Dear clients,
A closely watched US inflation report may help solve one of the most pressing questions among traders: whether the market has correctly identified the short-term trajectory of interest rates.
What to expect this month, our expert comments:
The market is expecting US inflation to rise by 0.3 p.p. to 3.3% on the back of unemployment falling to a multi-year low and wages continuing to grow at a strong pace, allowing Americans to increase consumer spending. Rising inflation is negative for the US stock market. On Thursday, consider selling #NQ100, #SP500, #Barric, #Amgen.
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A PLEASANT SURPRISE OR AN UNNECESSARY VARIABLE? UK ECOMOMICAL DATA
Dear clients,
The UK economy unexpectedly showed growth in the second quarter, laying the groundwork for further interest rate hikes by the Bank of England, but it remains the only major economy that has yet to recover the levels that preceded the economic crisis of late 2019.
Official data released on Friday showed the economy grew by 0.2% in the second quarter, contradicting economists' early forecasts. The data led to a sharp rise in sterling against the US dollar and euro.
The strong figures have bolstered bets that the Bank of England will continue to raise interest rates, as it emphasised this month that the strength of the economy is one of the factors on which it will base its decision. The central bank itself had forecast the economy to grow at 0.1% in the second quarter.
Now the Bank of England has a new headache — they may well have paused interest rate rises in the near future, but with such data it is much harder to do so, experts say.
British government bond yields rose after the market opened while investors were digesting the data.
Manufacturing recorded its best quarter since the start of 2019, aside from the initial rebound after the first COVID-19 lockout of 2020, with output up 1.6% quarter-on-quarter. Business investment also rose 3.4% for the quarter.
"The measures we are taking to tackle inflation are starting to work, which means we are laying the solid foundations we need to grow the economy," said Treasury Secretary Jeremy Hunt.
Although Britain, unlike the eurozone, has so far managed to avoid recession, the data confirmed the relatively poor performance of its economy since the start of the COVID-19 pandemic.
At the end of the second quarter, the British economy was 0.2% below year-end 2019 levels, compared to growth of 0.2% in Germany, 1.7% in France, 2.2% in Italy and 6.2% in the US.
GROWTH AND ACHIEVEMENTS. NEW FRESHFOREX AWARD
Dear clients,
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The company won in the nomination of the Fastest Growing Broker.
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We thank AllForexBonus.com for the recognition and appreciation of our efforts.
PROCRUSTEAN MARKET. THE INTERNATIONAL ENERGY AGENCY REPORT
Dear clients,
OPEC+ supply cuts could lead to lower oil inventories for the rest of this year, which could lead to further price increases before economic factors limit global demand growth in 2024, the International Energy Agency (IEA) said on Friday.
The IEA said that if current OPEC+ targets are maintained, oil inventories could fall by 2.2 million barrels per day (bpd) in the third quarter and 1.2 million bpd in the fourth quarter, "which could lead to further price increases".
"The deepening of OPEC+ supply cuts has collided with improving macroeconomic sentiment and record-high global oil demand," the Paris-based energy organisation said in its monthly oil market report.
Demand growth is forecast to slow sharply to 1 million bpd next year, the IEA said, citing weak macroeconomic conditions, a fading post-pandemic economic recovery and the growing use of electric vehicles.
The IEA's forecast for demand growth is down 150,000 bpd from last month and is at odds with OPEC, which on Thursday maintained its forecast that oil demand in 2024 will grow by a much larger 2.25 million bpd.
For 2023, the IEA and OPEC views are less far apart.
The IEA expects demand to grow by 2.2 million bpd in 2023, fuelled by summer air travel, increased oil use in the power sector and rising petrochemical activity in China. OPEC expects growth of 2.44 million bpd.
The projections show an average of 102.2 million bpd of demand this year, with China accounting for more than 70% of the growth, despite concerns about the economic health of the world's top oil importer.
Oil prices fell more than 1% on Monday as concerns about China's fragile economic recovery and a stronger dollar dampened seven-week gains amid supply cuts from OPEC+ production cuts.
Reflecting the supply cuts, the price spread between first- and second-month Brent crude was unchanged on Monday after settling at 67 cents on Friday, the widest since March.