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[Market Morning] The US PPI Fell in July to Support Inflation Peaking, the US Index Once Fell Below 105, and the Gold 1800 Mark Could Not Be Broken for A Long Time
In early Asian trading, the U.S. dollar index traded around 105.12, and the U.S. dollar fell slightly on Thursday. Data showed that U.S. inflation in July was not as hot as expected, prompting traders to lower their expectations for the Fed to raise interest rates in the future. The Fed is expected to raise interest rates by 50% in September. The probability of 1 basis point is 58%, and the possibility of raising interest rates by 75 basis points is 42%; the gold market has already digested most of the interest rate hike expectations, and the difference in future expectations is driving the transaction; oil prices rose more than 2.5%, benefiting from the IEA raises forecast for oil demand growth this year
Spot gold on Thursday approached the 1800 mark but failed to break above it, and then adjusted downwards, and finally closed down 0.12% at $1,789.54 per ounce; spot silver fluctuated downward and finally closed down 1.38% at $20.31 per ounce.
Comment: Gold prices fell on Thursday, weighed down by the prospect of further interest rate hikes by the Federal Reserve, despite data showing signs of peaking US inflation. Gold has been hovering around the key $1,800 level, and markets have trimmed rate hike expectations, which also weakened the dollar. While most Fed speeches continued to imply more rate hikes, the gold market has priced in most rate hikes, and it is the divergence in future expectations that is driving the trade.
Suggestion: long spot gold 1787.30 positions, target point 1806.90
The US dollar index broke below the 105 mark at one point, then recovered some of the lost ground in the day, and finally closed down 0.114% at 105.13. The yield on the 10-year US Treasury bond reached around 2.90%, up 20 basis points from Wednesday's low, and finally closed up 0.05%. The inversion of the 2-year/10-year US Treasury yield curve narrowed.
Comment: The dollar edged lower on Thursday after data showed that US inflation was not as hot as expected in July, prompting traders to lower expectations for future rate hikes by the Federal Reserve. Investors cut expectations for the Federal Reserve to raise interest rates by 75 basis points for a third straight month in September after a report on Wednesday showed US consumer prices were unchanged from the previous month. After the report, the dollar posted its biggest one-day drop in five months, and traders recalibrated their forecasts to factor in the possibility that inflation had peaked.
Suggestion: EUR/USD 1.03180 position to go long, target point 1.03660
In terms of two oils, WTI crude oil rose 3% during the day but failed to break above the $95 mark and finally closed up 2.73% at $94.07 per barrel; Brent crude oil closed up 2.24% at $99.25 per barrel.
Comment: Oil prices rose more than 2.5% on Thursday after the International Energy Agency (IEA) raised its forecast for oil demand growth this year as soaring natural gas prices drove some consumers to oil.
Suggestion: US crude oil is short at 93.254; the target point is 90.470
US stocks closed, the three major stock indexes opened higher and moved lower, the Dow closed up 0.08%, the Nasdaq closed down 0.58%, and the S&P 500 closed down 0.07%. Most popular Chinese concept stocks rose. Xiaopeng Motors rose more than 7%, Tencent Music rose more than 6%, and Bilibili rose more than 4%.
Comment: The Nasdaq and S&P 500 fell on Thursday as the market realized the Fed needed to aggressively raise interest rates to fully tame rising consumer prices despite fresh evidence of cooling inflation.
Suggestion: go short at 13300.700 of the Nasdaq index, target point at 13244.600
Mexico's central bank raises the benchmark rate to a record high to curb inflation.
Mexico's central bank raised its key interest rate to a record high after inflation hit its highest level in more than 21 years. Mexico's central bank raised interest rates for the second time in a row by 75 basis points on Thursday, raising the benchmark rate to 8.5%, in line with expectations of all 24 economists polled by Bloomberg. This is the highest interest rate since the bank began implementing inflation targeting in 2008, and the previous record was 8.25%. The move mirrors the Fed's rate hike last month, as Mexican policymakers tend to follow the US lead to avoid sudden capital outflows. The Bank of Mexico initially raised interest rates slightly by 25 basis points and upgraded to 75 basis points in June. The cumulative rate hike in the past 14 months has increased by 4.5 percentage points, which has more than doubled the benchmark interest rate.
European electricity prices hit a record high again, the energy market in jeopardy.
European power prices rose to record levels on Thursday, and the strong gains appeared to show no signs of abating. The benchmark price for electricity delivered in Germany next year rose as much as 4.5% to a record 446 euros/MWh, the data showed. In France, the price of electricity delivered next year rose by 4.4% to exceed 600 euros for the first time.
OPEC sees the global oil market slipping into oversupply this quarter
The Organization of the Petroleum Exporting Countries (OPEC) expects the global oil market to sink into a supply glut this quarter while downgrading its demand outlook and raising its non-OPEC supply forecast. According to OPEC's latest monthly report, it lowered its third-quarter crude output forecast by 1.24 million BPD to 28.27 million BPD. That's about 570,000 bpd lower than OPEC's 13-member output in July. OPEC's Vienna-based research unit lowered its forecast for global crude oil demand this quarter by 720,000 BPD while raising its non-OPEC supply forecast by 520,000 BPD. The average crude oil consumption in this quarter is expected to be 99.93 million barrels per day.
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