US stocks started the week on the back foot as investors assessed the impact of the labour data from last week. Further remarks from a Fed official signalled that interest rates could remain higher for longer. Still, that did little to impact market expectations in regard to the Fed’s path, with forward swaps only pricing in 6bps until the year-end. The key risk this week is US CPI, which is expected to have re-accelerated in July, growing by 3.3% y/y, while core is set to remain unchanged at 4.7%. Despite CPI ticking up higher, longer-term disinflationary pressures would be in line with market expectations of the end of the tightening cycle. The dollar remained strong above 102, and the 10yr US Treasury yield continued to soften following last week’s moves on the upside.
Base metals continued to drift lower today, weighed on by stronger dollar moves. We expect the greenback to remain robust in Q3 2023, as the US remains one of the most resilient economies among the group, and earlier end of the tightening cycle in comparison to the ECB and the BOE is less likely to provide headwinds to currency performance in the near term. Copper remained supported above $8,460/t, settling slightly above this level at $8,485/t. We are cautious of the potential supply risks bubbling up in the copper market. In particular, threats of El Nino could trigger major supply disruptions for mines across the affected regions. For now, a bearish macro is still present, but support levels remain firm above the cost of production in the meantime. Aluminium remained unchanged at $2,230/t. Nickel continued to edge lower into the $21,100/t support area. Lead and zinc both remained broadly unchanged, closing at $2,138/t and $2,496.50/t, respectively.
Oil futures weakened amid general risk-off sentiment today, with WTI and Brent falling to $81/bl and $85/bl. Gold and silver remained muted at $1,933/oz and $23.15/oz, respectively.
All price data is from 07.08.2023 as of 17:30