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Oil edges off low as strong export demand drains U.S. crude stocks

 

 

“Failure is success if we learn from it.” – Malcolm Forbes

 

 

HEADLINES

 

  • Sterling slips as double-digit inflation deepens growth fears
  • Gold drops for third day with focus on FOMC minutes
  • Oil edges off low as strong export demand drains U.S. crude stocks
  • Wall St drops as growth stocks slide, Target weighs on retail shares
  • Treasury yields rise as markets await Fed meeting minutes
  • EUR/USD to go below parity – Danske Bank
  • GBPJPY Near Term: Upside favored

 

Sterling slips as double-digit inflation deepens growth fears

 

The British pound weakened on Wednesday as data showed inflation climbed to its highest level in more than four decades in July, heaping pressure on the Bank of England to bring down prices but increasing the risk of a sharper economic slowdown.

Consumer price inflation rose to 10.1% in July, its highest since February 1982, official figures showed. A Reuters poll showed economists had expected inflation to rise to 9.8%.

Higher-than-forecast inflation supports the view that the Bank of England (BoE) will follow up last month's 50 basis point rate rise with a second consecutive half-point increase in September.

 

 

COMMODITIES

 

Gold drops for third day with focus on FOMC minutes

 

Gold prices extended losses to a third straight session on Wednesday as the dollar and U.S. Treasury yields firmed, while investors zoned in on the upcoming minutes from the U.S. Federal Reserve’s July meeting.

Spot gold fell 0.5% to $1,767.59 per ounce by 10:13 a.m. ET (1413 GMT). U.S. gold futures eased 0.4% to $1,782.00.

The dollar index rose 0.2%, making bullion more expensive for overseas buyers, while U.S. Treasury yields were also up for the day.

 

 

ENERGY

 

Oil edges off low as strong export demand drains U.S. crude stocks

 

Oil edged 1% higher after earlier hitting a six-month low on Wednesday, as a steeper-than-expected drawdown in U.S. crude stocks outweighed concerns over rising output, Russian exports and recession fears.

U.S. crude stocks (USOILC=ECI) fell by 7.1 million barrels in the week to Aug. 12 to 425 million barrels, Energy Information Administration (EIA) data showed, compared with analysts' forecasts for a 275,000-barrel drop in a Reuters poll.

Brent crude rose $1.09, or 1.1%, to $93.45 per barrel by 12:23 p.m. ET (1723 GMT). Earlier in the day, recession worries had pushed the benchmark price to its lowest since February at $91.51.

 

 

STOCKS

 

Wall St drops as growth stocks slide, Target weighs on retail shares

 

Wall Street's main indexes fell on Wednesday as growth stocks came under pressure after bond yields climbed ahead of minutes from the Federal Reserve's July meeting, while weak results from Target dragged the retail sector lower.

Retail earnings have been mixed so far this week, with Target Corp (TGT.N) falling 3.3% after reporting a 90% slump in quarterly earnings as its inflation-hit customers reined in spending on discretionary goods.

The S&P 500 retail sector (.SPXRT) declined 1.7%, after jumping 1.9% in the previous session on encouraging quarterly earnings from Walmart Inc (WMT.N) and Home Depot Inc (HD.N).

 

Treasury yields rise as markets await Fed meeting minutes

 

U.S. Treasury yields rose Wednesday on weaker demand for fixed income assets as investors awaited the release of the Federal Reserve’s minutes from its July meeting.

The yield on the benchmark 10-year Treasury note rose just over 7 basis points to 2.893%, while the yield on the 30-year Treasury bond traded up 2 basis points to 3.137%. Yields move inversely to prices, and a basis point is equal to 0.01%.

The yield on the shorter-term 2-year Treasury note was last up more than 7 basis points at 3.327%.

 

 

ANALYSIS

 

EUR/USD to go below parity – Danske Bank 

 

“The large negative terms-of-trade shock to Europe vs US, a further cyclical weakening among trading partners, the coordinated tightening of global financial conditions, broadening USD strength and downside risk to the euro area makes us keep our focus on EUR/USD moving still lower (targeting 0.95) – a view not shared by the consensus.”

“The key risk to shift EUR/USD towards 1.15 is seeing global inflation pressures fade and industrial production increase. However, ‘transitory’ has substantially lost credibility and European industrial production continues to be weak. This will continue as manufacturing PMIs heads below 50. The upside risk also includes a renewed focus on easing Chinese credit policy and a global capex uptick but neither appear to be materialising, at present.”

 

 

CHART

 

GBPJPY Near Term: Upside favored

 

Technical View: Long position above 162.63. Target 164.05. Conversely, break below 162.63, to open 161.99.

Comments: The pair remains supported. Further advance favored.

 

 

Source: Trading Central 

 

 

CALENDAR

 

*Times in GMT

 

 

Source: FX Street Economic Calendar

 

 

SOURCES

 

https://www.reuters.com/business/finance/sterling-struggles-double-digit-inflation-deepens-growth-fears-2022-08-17/
https://www.reuters.com/article/global-precious/precious-gold-drops-for-third-day-with-focus-on-fomc-minutes-idUSL4N2ZT2UU
https://www.reuters.com/business/energy/oil-prices-recover-6-month-lows-after-drop-us-stockpiles-2022-08-17/
https://www.reuters.com/markets/europe/futures-drop-target-results-disappoint-growth-stocks-slip-2022-08-17/
https://www.cnbc.com/2022/08/17/treasury-yields-rise-as-markets-await-fed-meeting-minutes.html
https://www.fxstreet.com/news/eur-usd-to-go-below-parity-danske-bank-202208171612