Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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Last week’s boredom finally ended on Friday following comments from Kevin Warsh at the Jackson Hole Symposium in Wyoming. The Federal Reserve Chairman gave his most candid view yet on the threat of inflation in the United States, stating that the committee “will have work to do” in order to bring rates back down to 2%. Warsh continued by saying that although headline numbers had improved, the latest data did not show that underlying inflation trends had “meaningfully improved”. Although the Fed is still refusing to give away much in terms of forward guidance, the message is straightforward. Rate hikes are absolutely still on the menu, and in fact the odds of such increased dramatically after Friday’s speech. According to CME’s FedWatch tool, the September meeting is now leaning towards a 60% chance of a 25-bps hike on the dollar; the same tool estimates only a 10% chance of interest rates remaining unmoved by the end of the year. The greenback reacted as one might expect, attracting foreign exchange flows that ultimately pushed the DXY up half a percent by the daily close, to 99.7 points. Precious metals took the news badly, with gold dropping around $150 on Friday to close the week at $4,455 per ounce and silver losing around $3 to hit $66.35 per ounce. Bitcoin also fell precipitously, forfeiting its membership of the $80,000 club and settling back down to the $77k range. US stocks incurred only minor losses on the day.
For all the movement in other commodities, crude oil prices were remarkably stable on Friday, as the main seaborne benchmark remained anchored at $88 per barrel. There appears to be a lot going on behind the scenes in the oil industry, particularly in Venezuela, as a series of cryptic messages emerged over the weekend concerning the South American nation’s vast oil reserves. According to a social media post on Friday, President Trump claimed that the US would acquire a stake in said reserves, while Venezuela’s acting president Delcy Rodríguez described the agreement as a step towards modernising the nation’s oil industry. Trump went on to explain on Sunday that part of the deal would see Venezuelan oil being used to fill up the US Strategic Petroleum Reserve, which is currently only around 40% full. Details of the arrangement have not yet been forthcoming.
The recent rapprochement towards the United States aligns perfectly with a separate rumour currently floating around Caracas, which suggests that Venezuela may be getting closer to withdrawing from OPEC, of which it is a founding member. When the organisation was first created back in 1960, the explicit purpose of the oil cartel was to consolidate power away from Western oil majors – the very same powers that are now establishing deals to exploit large swathes of Venezuela’s oil fields. The irony is lost on no one.
The London Stock Exchange is closed today for the Summer Bank Holiday, but all other major exchanges will remain open this week. Eurozone CPI figures hit the newswires on Tuesday, followed by the July JOLT survey and the ISM manufacturing PMI later on in the US session. On Wednesday, the Bank of Canada is expected to hold rates steady on the Canadian dollar at 2.25%. On Thursday, the ISM will complete the services element of the PMI picture. Finally, on Friday, markets will brace themselves for the August non-farm payroll report, which is expected to showcase 45 thousand new jobs. Speaking of NFP reports, last Friday’s preliminary benchmark revision cut just 79 thousand jobs over the entire yearly period, representing a 0.1% change overall, producing no market reaction whatsoever. The earnings calendar is relatively quiet this week, with the exception of Dell Technologies (DELL) on Tuesday and Broadcom (AVGO) on Wednesday.
The other major event of note is this year’s G20 summit, which will take place in North Carolina on Monday and Tuesday and is expected to cover ongoing tariff disputes as well the situation in the Middle East, which may well be the driving force in market sentiment over the next few days. The week is young but reports of attacks against oil tankers and Iranian targets alike are beginning to emerge, pushing the Brent Crude benchmark back towards $90 per barrel as oil markets open for trading. Asian stock exchanges are not impressed, with the Nikkei 225 and Kospi indices opening with moderate gaps to the downside earlier this morning.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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