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OPEC’s monthly oil market report was published on September 10. The cartel slahsed demand estimates again.

• oil demand will grow by 2 million b/d in 2024
• this is down 80,000 b/d from the forecast in August
• for 2025, demand will rise a further 1.7 million b/d, a 40,000 b/d downward revision

OPEC has lowered its “call on OPEC+ crude” for 2024 by 360,000 b/d over the past five months

• and for 2025 by 530,000 b/d over that period

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ps. “Call on OPEC+ crude” refers to the demand or requirement for oil from OPEC+ countries to balance the global oil market. The “call” represents the amount of crude oil that the world needs from these producers to meet global oil demand, after considering other sources of oil supply (like non-OPEC producers) and changes in global oil inventories. It’s an indicator of how much oil OPEC+ needs to produce to stabilize prices and ensure enough supply to meet demand.

OPEC+ is a group of oil-producing nations, including the Organization of the Petroleum Exporting Countries (OPEC) and additional non-OPEC members like Russia.

This article was written by Eamonn Sheridan at www.forexlive.com.

• BOC’s Macklem: Bigger cuts are possile if economy and CPI weaker
• Macklem Q&A: Employment is not negative but is well below population growth
• BOC’s Macklem: Trade disruptions may mean larger deviations from our target
• Bank of Japan officials see little need to hike rates
• US Treasury auctions $58B of 3 year notes at a high yield of 3.440%
• Fed’s Barr comments on Basel rules
• US CPI preview: Inflation expected to fall to the lowest since 2021
• US August NFIB small business optimism index 91.2 vs 93.7 prior

Markets:

• Gold up $11 to $2516
• WTI crude oil down $2.58 to $66.13
• US 10-year yields down 5.1 bps to 3.65%
• S&P 500 up 0.45%
• JPY leads, CAD lags

USD/CAD was particularly strong as Macklem’s comments suggested an effort to put a 50 bps cut on the table for the October meeting if economic data continues to disappoint, particularly on growth. The pair is back into the April-July range and has now broken out on either side of it in what’s been a tough technical trade. Surely the drop in oil prices is also weighing on the loonie.

The pound and euro were particularly weak in late European trade but steadied from there and cable managed to recover into positive territory on the day in a nearly 30 pip late-day climb.

With falling yields, USD/JPY was dragged lower again, finishing the day down 85 pips and erasing the weekly gain. Across the board, yen trades are perilously close to breaking down again in what could be a red flag for all markets. USD/JPY is only about 50 pips above the spike low fro August.

The drop in yields raises the stakes for Wednesday’s CPI report and some eyes are also on the debate later today. That’s sure to underscore that there is no serious candidate on deficit reduction.

Tuesday’s trade was light in terms of newsflow but presented a divergence in overall sentiment. Bonds and the yen were bid strongly (particularly after the auction) while equities firmed led by tech. Oil also painted a very downbeat picture on the global economy as the settlement was the lowest since 2021 on selling in six of the past seven days.

This article was written by Adam Button at www.forexlive.com.

The broader stock indices closed higher for the second consecutive day this week. The gains were led by the Nasdaq index which tumbled -5.77% last week. After 2-days this week, the index is up 2.01%. The S&P which fell -4.25% last week, is up 1.61% after Monday and Tuesday.

The Dow industrial average fell today on the back of financials losing ground:

• Bank of America (BAC) fell -0.44% fter an early gain.
• JPMorgan (JPM) dropped -5.19%; COO Daniel Pinto suggested net interest income expectations were “not very reasonable.”
• Keefe Bruyette noted JPMorgan’s guidance was 21 cents below consensus.
• Goldman Sachs (GS) slid -4.39% following CEO David Solomon’s comments on weaker fixed income and equities results, down 10% year-over-year.
• Ally Financial (ALLY) plummeted -17.60% after revising margin guidance lower due to expected increased charge-offs and delinquencies in Q3.
• American Express fell -2.18%

A snapshot of the closing levels shows:

• Dow industrial average fell -92.64 points or -0.23% at 40736.96
• S&P index rose 24.46 points or 0.45% at 5495.52
• NASDAQ index rose 141.28 points or -0.84% at 17025.88

The small-cap Russell 2000 fell -17.64 points or -0.83% at 2097.43.

Some winners today included:

• Chewy up 6.01%. Today is our dog’s birtday. Happy Birthday Samson. You get a Chewy treat today
• Broadsom rose 5.26%
• Tesla +4.58%
• Moderna, +3.49%
• AMD, +3.39%
• Alibaba, +.2.92%
• Roblox, +2.91%
• Giliead +2.83%
• Amazon, +2.36%
• Mircrosoft, +2.09%

In addition to the Financial decliners outlined above, other losers today included:

• GM, -5.44%
• Ford, -3.24%
• Gamestop, -3.24%
• Dollar Tree, -3.01%
• Exxon Mobile, -2.71%
• Celcius, -2.7%
• Citigroup, -2.70%

This article was written by Greg Michalowski at www.forexlive.com.

We have Sarah Hunter, Assistant Governor (Economic) at the Reserve Bank of Australia speaking today.

I’ve added it to the screenshot below, and I posted a little on what to listen out for earlier:

• AUD traders heads up – RBA (Hunter) speaking on Wednesday

After Hunter the calendar gets very bleak … why do I always get to cover the US presidential debates, huh?

It’s the absolutely awesome <insert your fave here> vs. the completely terrible <insert your nemesis here>.

I’ll have pertinent headlines. And …. its weird but you can watch the debate live on Disney TV if you want to.

This article was written by Eamonn Sheridan at www.forexlive.com.

Good morning, afternoon and evening all. Any charts, technical analysis, trade ideas, thoughts, views, ForexLive traders would like to share and discuss with fellow ForexLive traders, please do so:

This article was written by Eamonn Sheridan at www.forexlive.com.

The Canadian dollar is the weakest performer today and if you read between the lines in Tiff Macklem’s comments, the Bank of Canada is trying to put the possibility of a 50 basis point cut in October on the table, particularly if upcoming GDP reports highlight ongoing weakness.

A big reason that they need to cut fast is that the housing pipeline is drying up. There are still 20,000 condos to be completed in Toronto alone in the next two years but single family starts and townhouses are stalling at a time when there is extreme pressure to improve affodability.

Given Canada’s construction productivity problems, the outlook isn’t good. The alternative is that growing anti-immigration sentiment catalyzes into a place that’s irreversible, leading to a population undershoot. That could lead to a secular stagnation in the economy, particularly if the global economy doesn’t improve.

The fear for many is that Canada re-inflates the housing bubble.

Ultimately, I think it will be impossible to fix Canada’s problems with high, or even medium interest rates. For me, all roads lead back into the sub-2% range and structurally lower rates than the US. With that, the relief valve will be the currency.

The risk from that is that Canada imports inflation and rates will need to rise again but I think there is enough slack building in the jobs market and global economy that Canada will keep rates low.

This article was written by Adam Button at www.forexlive.com.

In the long-running battle between stocks and bonds, the latter is usually right when it comes to the economy. Given that oil and the yen are also flagging trouble, the signs are hard to ignore.

In early August, when US yields fell, it looked like a reaction to a flight-to-safety as some air came out of the AI trade and megacap tech stocks but when those rebounded, yields didn’t. Now they’ve fallen even further and signal a hasty Fed rate cutting cycle. Now Powell may front-load rate cuts in an effort to stick a soft landing but that path is perilous.

In addition, there is the global economy to worry about and the signals from oil and other commodities are poor. Brent and WTI today settled at the lowest since 2021, iron ore has plunged lately and copper is back to $4/lb.

Finally, the yen carry trade isn’t showing any signs of recovery after the battering in August. If anything, the growth-sensitive trades are flagging the risk of another leg lower.

Later this month, I will be hosting a webinar or signals of trouble in the global economy and where to camp out. I’m looking forward to it. Register here.

This article was written by Adam Button at www.forexlive.com.

Dr. Copper hasn’t been in a good mood since May, when a speculative squeeze drove it to $5 followed by a sharp turn lower. It’s currently flirting with $4 as the market frets about a global growth slowdown.

Given the price action in bonds, JPY and oil, I think a further slowdown is a material risk. Some of that is priced in but I don’t think we’re there yet. Perhaps if the Fed and other central banks get aggressive on rate cuts, the market can start to feel better but the real linchpin for copper is China, which is 50% of demand.

The opportunity in copper may not knock until China starts to stimulate. If not, 2025 could be a tough year, with prices stuck with a $3-handle. The upshot from that is that it will further squeeze the investment pipeline. After 2025, there isn’t any significant new supply coming while demand will get a secular lift from investments in green energy and a much-needed investment in the grid.

So the best trade here (as usual) is probably the patient one. Given the recessionary winds, we may get a chance to buy copper or copper miners at somewhere close to $3.50.

This article was written by Adam Button at www.forexlive.com.

As inflation in the US ramped and then rolled over, it was typical to get massive market moves on CPI data but as prices have cooled, so has the market reaction.

Unfortunately, the magic is gone — and now rests with non-farm payrolls as the Fed focuses on its employment mandate — but it’s still a market mover and certainly the most-important data point this week.

The consensus on the headline number is +0.2% m/m and +2.6% y/y. The latter would be the lowest since 2021. In fact, anything below last month’s 2.9% reading will be the lowest since 2021.

It’s a reminder that inflation is almost back to target. Another helping hand for inflation is currently coming from the oil market, where prices have plunged in the past week and at $65.80 are more than 25% below where they were at this time last year. That will drive some valuable downward momentum in next month’s report and should help the market look past a 0.1 or 0.2 pp upside surprise in this month’s data.

More importantly will be the core number, which excludes food and energy. The consensus there is for a 0.2% m/m reading and a 3.2% y/y/y reading, in part because home prices and rents are taking some time to filter through. Another metric the Fed will be watching is ‘supercore’ inflation, which is CPI services ex-housing. It was at 4.5% y/y last month and that’s a reminder that goods are doing all the heavy lifting in the report at the moment, in part because insurance rates take a long time to be passed on.

Digging deeper into the consensus, the core number is well-balanced with a roughly equal number of economists expecting upside and downside surprises but on the headline y/y print, there is a downward bias.

Why I think this report might be more-important than some recent editions is the FOMC decision on September 18. The market is struggling to decide whether Powell will go by 50 bps or 25 bps. Current pricing is 33% for 50 bps but that could rise to 40% if both core and headline undershoot, even slightly.

There is a consistent consensus of economists saying the Fed should cut 50 bps but probably won’t. I sense a strong desire from Powell and other top FOMC officials to be proactive and get ahead of the kind of economic softness that was flagged in the Beige Book.

Moreover, the bond market is screaming that inflation is no longer a problem, with US 5-year yields today hitting the lowest since 2023.

Five year breakevens are also at 1.88% (lowest since Dec 2020), suggesting the bigger risk is a Fed undershoot on inflation.

FX market reaction

Overall, I see downward risks to the US dollar and the potential for a rise in risk assets on this report. A upside miss should be easily brushed aside because of the pressure from oil and raw materials that’s looming. Meanwhile, a downside miss will raise the possibility the Fed could tag 2% inflation this year. There are some base effects that reverse late in the year that will add some pressure but the lower track will underscore that inflation is yesterday’s problem.

This article was written by Adam Button at www.forexlive.com.

High Yield:3.440%

• Previous: 3.81%

WI Level at the time of the auction: 3.457%

Tail: -1.7 bs

• Previous: -0.2bps

• Six-auction average: 0.1bps

Bid-to-Cover: 2.66X

• Previous: 2.55x

• Six-auction average: 2.56x

Dealers:10.45%

• Previous: 15.4%

• Six-auction average: 16.4%

Directs (a measure of domestic demand):11.3%

• Previous: 20.3%

• Six-auction average: 18.8%

Indirects (a measure of international demand):78.24%

• Previous: 64.4%

• Six-auction average: 64.7%

AUCTION GRADE: A

Details: The International buyers showed up and crowded out the other bidders. The international buyers took 78.24%. That was well above the 64.7% six-month average. As result, domestic buyers only to 11.3% well below the six-month average of 18.8%.

The international demand was evident from the -1.7 basis point tail. The tail is the difference between the WI level at the time of the auction and the high yield. That compares very favorably to the +0.1 basis point tail seen over the last six months.

The bid to cover was stronger as well at 2.66X vs 2.56X average.

This article was written by Greg Michalowski at www.forexlive.com.

The first of 3 coupon auctions for the week will start today at 1 PM when the US treasury auctions off $58 billion of 3-year notes. The treasury will auction off 10-year notes tomorrow and 30-year bonds on Thursday.

The note auction success (or failure) will be judged by the results vs the 6 month averages of the major components.

Last month the 3 year auction went near the averages.

• High Yield:

• Previous: 3.81%

• Six-auction average: 4.3m

• Tail:

• Previous: -0.2tps

• Six-auction average: 0.1bps

• Bid-to-Cover:

• Previous: 2.55x

• Six-auction average: 2.56x

• Dealers:

• Previous: 15.4%

• Six-auction average: 16.4%

• Directs (a measure of domestic demand):

• Previous: 20.3%

• Six-auction average: 18.8%

• Indirects (a measure of international demand):

• Previous: 64.4%

• Six-auction average: 64.7%

This article was written by Greg Michalowski at www.forexlive.com.

It wasn’t a pretty one for European stock markets today:

• Stoxx 600 -0.5%
• German DAX -0.9%
• Francis CAC -0.3%
• UK’s FTSE 100 -0.7%
• Spain’s IBEX -0.6%
• Italy’s FTSE MIB -1.0%

This article was written by Adam Button at www.forexlive.com.