US stocks softened today after further data releases reaffirmed the bets of rates remaining higher for longer. US service sector activity increased by 2bps to 54.5 in August, marking the 6-month high. The robustness of household spending has helped to support the strength in demand month-on-month. Meanwhile, continued gains in the cost of materials and wages could once again risk inflation remaining upwardly sticky. The dollar tested the 105 level given the higher-for-longer interest rate narrative. Elsewhere, probabilities of further tightening from other key central banks, the ECB and the BOE, diverged after prospective policymakers commented on their forward-looking views. The ECB’s Knot suggested that next week’s hike is being underestimated, while the BOE’s Bailey mentioned that UK rates might be near the top of the cycle. Forward swaps are now pricing in 8bps and 25bps during the next meeting, respectively.
The base metals complex softened marginally today on the back of a stronger dollar. As a result of greenback gains, authorities in China have had to step up their efforts to defend the currency, which is currently testing the 7.35 level. Indeed, the nation’s central bank offered the most forceful guidance on record for daily reference rates to prevent further currency losses. Aluminium fluctuated during the day, settling pretty much unchanged at $2,195/t. Copper broke below the $8,400/t level after it struggled to pierce the $8,500/t resistance. Both lead and zinc remained firmly supported above $2,200/t and $2,450/t, closing at $2,225.50/t and $2,463/t, respectively. Lead cash to 3-month spread continued to climb, edging to a June high of $63/t – the only metal to see a front-month backwardation. Spreads elsewhere remained unchanged.
Oil futures remained unchanged, while gold and silver continued to drift lower into $1,915/oz and $23.00/oz, respectively.
All price data is from 30.06.2023 as of 17:30