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DOE crude oil inventories for July 10 week -7.493M vs -2.098 million estimate

  
  Analysis
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DOE crude oil inventories for the week of July 10, 2020

  • crude oil inventories -7.493 million vs. -2.1 million estimate
  • gasoline inventories -3.147 million vs. -1.3 million estimate
  • distillates inventories -0.453 million vs. 1.5 million estimate
  • Cushing OK crude inventories 0.949 million vs. 2 point to 0 6 million last week
  • US refinery utilization 0.6% vs. 0.5% estimate
  • crude oil implied demand 17637 vs. 17586 last week
  • gasoline implied demand 9248.4 vs. 9290.0 last week
  • distillates implied demand 5023.7 vs. 4380.1 last week
The private API data released near the close of yesterday’s trade showed a bigger than expected drawdown of -8.322. Today’s crude oil inventory data was below the API data by about 900 K. Below are the private data results:
DOE crude oil inventories for the week of July 10, 2020
Crude oil is trading at $40.50 just prior to the report. The current price is trading at $40.64

Bank of Canada holds rates at 0.25%, as expected

  
  Analysis
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Highlights of the Bank of Canada rate decision

  • Prior was 0.25% (this is the effective lower bound for Canada)
  • BOC pledges to keep rates at 0.25% until inflation target hit
  • BOC to continue $5B per week in QE; repeats buying will continue “until the recovery is well underway”
  • BOC stands ready to adjust its programs if market conditions warrant
  • Says economic decline “considerably less severe than the worst scenarios presented in the April MPR”
  • BOC sees 40% of activity recovered in Q3 but then “the Bank expects the economy’s recuperation to slow as the pandemic continues to affect confidence and consumer behaviour and as the economy works through structural challenges”
  • Central scenario in in MPR shows economy not likely to return to pre-COVID levels until 2022
  • Sees 2020 GDP down 7.8%, up 5.1% in 2021 and up 3.7% in 2022
  • Says Q2 activity estimated to have fallen about 15% below its level at the end of 2019, economy appears to have bottomed in April
  • Sees US GDP down 8.1% in 2020, up 3.4% in 2021 and up 4.3% in 2022
  • Global GDP forecast down 5.2% in 2020 and up 5.2% in 2021
  • The path for CPI in the next year largely reflects the influence of energy prices
The big news here is this line:
“The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved.”
That’s forward guidance indicating no hikes until 2% inflation is ‘substantially achieved’. That last phrase leaves them some wiggle room but this is conditional forward guidance.
Macklem will hold a briefing at 1500 GMT (11 am ET)
Forecasts in the MPR:
BOC forecasts for developed world

Trump says he is not interested in speaking with China on another trade deal

  
  Analysis
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Whiny biatch speaking in a CBS interview Sry, damn autocorrect. Trump speaking in a CBS interview.

So far he has been whining about getting schools reopened and various grievances he has with life.
Comment on China the only one really pertaining to markets, so far at least.
Whiny biatch speaking in a CBS interview Sry, damn autocorrect. Trump speaking in a CBS interview. 

More from Trump:

  • We can impose massive tariffs on China f we want
  • You’ll see more coming on actions towards China
  • China is buying a lot of agricultural products

OPEC: Sees demand falling 8.95 mbpd this year, rising by 7 mbpd in 2021

  
Analysis, Crude
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Highlights of the OPEC monthly oil report

  • Sees 2020 demand -8.95 mbpd vs -9.07 in prior report
  • Sees US output down 1.37 mbpd this year; +0.24 mbpd next year
  • Oil stocks are 210 million barrels above 5-year avg
  • Efficiency gains and remote working to cap demand rise in 2021 to below 2019 levels
A separate report, citing delegates, sees OPEC+ June compliance at 107%.

UK PM Johnson: We do think masks have a great deal of value in confined spaces

  
  Analysis
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Comments by UK prime minister, Boris Johnson

Boris Johnson
  • We have got the virus under control across the country
  • It is very important to wear a face covering in shops
  • Will look at the guidance and say more in the next few days
Judging by recent remarks by the government, it is only a matter of time now before masks are surely going to be mandatory in shops across the UK.
In the US, Trump also wore a mask in public over the weekend but we’ll see if he will start doing so outside of the hospital. If so, that could mark a change of a stance and may help to create more health awareness in mitigating the spread of the virus.

Japan reaffirms that state of emergency declaration is not needed for now

  
  Analysis
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Tokyo finds another 119 new coronavirus cases today

Japan economy minister, Yasutoshi Nishimura, is out to reaffirm that there is no need to declare another state of emergency in Tokyo just yet despite the consistent jump in the number of coronvirus cases in the capital over the past two weeks.
The count today may be skewed due to the ‘weekend effect’, with Tokyo having previously reported over 200 new cases each day over the last four days before this:
Tokyo

Nikkei 225 closes higher by 2.22% at 22,784.74

  
Analysis, Global Indices
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Asian equities buoyed to kick start the new week

Nikkei 13-07

It has been a solid session for Asian equities, with the Nikkei closing at a one-month high while we are also seeing the Hang Seng post 1.1% gains and the Shanghai Composite also seen higher by 1.9% currently.

The positive spillovers from US trading at the end of last week is helping, but also the fact that US futures are keeping more optimistic so far today.
Some market participants are pointing to this Pfizer, BioNTech vaccine story as a factor, following the more positive results that were reported two weeks ago here.
In any case, risk is on and the market is looking to keep the more positive mood going into European trading today. As such, the dollar is weaker across the board alongside the yen, with AUD/USD hovering around 0.6980 currently.

AUD/USD to drop back to 0.64 by year end – global economy weakening, China retaliation

  
Analysis, Forex
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A brief summary from a late week Rabobank note on the Australian dollar:

  • investors are currently over-estimating the ability of the global economy to bounce back from the pandemic
Combined with:
  • any news that China could be targeting Australian exports in retaliation for the government’s political stance would also leave AUD vulnerable
Rabo’s view is thus:
  • we see risk of a drop in sentiment by the end of the year 
  • likely to drag AUD/USD lower
  • forecast AUD/USD at 0.64 on a six-month view
A brief summary from a late week Rabobank note on the Australian dollar:

Here’s a EUR/USD forecast (to 1.15) with the ECB expected to be optimistic this week

  
Analysis, Forex
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The European Central Bank meet this week, preview below.

  • Meeting Thursday 16 July 2020
  • Policy announcement at 1145GMT (policy likely unchanged)
Euro forecast via Danske (this from late last week):
  • We remain constructive and expect the broad USD to decline over the coming months
  • 3 month forecast is 1.15
On the upcoming ECB policy meeting
  • we expect a repetition of recent comments from various governing council members, thereby striking a cautiously optimistic tone compared to the June projections. 
  • We also expect they may decide not to use the EUR1,350bn PEPP envelope in full. 
  • No new initiatives are expected next week
  • Markets may not be prepared for a ‘less dovish’ message
  • with abundant liquidity, PEPP and APP still ongoing
  • Our key expectation is that the ECB will reiterate its stance towards supporting a recovery, with, not least, a focus on sovereign spreads. 
For spot FX,
  • the direction and stance of the ECB and euro area fiscal politics are, in our view, quite well priced and communicated (though to a lesser extent when it comes to the outcome for Brexit). In turn, it will be the breath and speed of the global recovery that sets the tone in EUR/USD, and mostly through the USD leg

European Central Bank preview

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