Chapter 2 July 5th Financial News
[Quick Facts]
1. The RBA pauses rate increases but is open for future hikes.
2. The World Meteorological Organization declares the onset of El Niño conditions.
3. Saudi Arabia's production cuts prompt its major buyers to buy crude oil elsewhere.
4. The probability of a 25bp Fed rate hike in July is 86.2%.
[News Details]
The RBA pauses rate increases but is open for future hikes
The Reserve Bank of Australia (RBA) paused interest rate hikes in July, keeping its benchmark rate at 4.1%, the highest level since 2012. But further tightening of monetary policy may be needed in the future to ensure that inflation returns to target levels within a reasonable time frame. Economists believe that after another rate hike in the third quarter, the RBA may stay put for the rest of 2023 and then start cutting rates in the first quarter of 2024.
The World Meteorological Organization declares the onset of El Niño conditions
The United Nations' World Meteorological Organization (WMO) issued an announcement on Tuesday confirming that there is a 90% probability of the El Niño event continuing during the second half of 2023. According to the U.S. National Centers for Environmental Prediction (NCEP), the global average temperature reached 17.01 degrees Celsius on Monday (July 3), the hottest day on record globally, surpassing the record of 16.92 degrees Celsius in August 2016.
Saudi Arabia's production cuts prompt its major buyers to buy crude oil elsewhere
Asian refiners are preparing to turn elsewhere for crude oil recently, in case the latest production cuts promised by Saudi Arabia and Russia cause them to lose oil supplies. Yesterday, Saudi Arabia and Russia announced they would extend production cuts through August. Traders said there are ample supplies of crude oil from producers outside OPEC, particularly in areas such as the United States, West Africa, and the North Sea. If the regions do get hit by the recent production cuts, they will turn to those oil producers. Any influx of oil from the Atlantic basin into Asia would be a mixed blessing for Middle Eastern producers. On the one hand, it could help deplete supplies to the U.S. and Europe. On the other hand, it could mean they would lose a share of the fastest-growing demand market. Traders said that Asian spot markets saw healthy demand last month, but expectations of relatively high Saudi crude prices in August could sap interest in Middle Eastern oil destined for Asia during the current cycle.
The probability of a 25bp Fed rate hike in July is 86.2%
According to the CME FedWatch Tool, the probability of the Fed keeping rates unchanged at 5.00%-5.25% in July is 13.8%, and the probability of raising rates by 25 basis points to the 5.25%-5.50% range is 86.2%. The probability of keeping rates unchanged by September is 10.9%, and the probability of raising rates by a total of 25 basis points is 71.0%, and by a total of 50 basis points, 18.1%.
[Focus of the Day]
UTC+8 09:45 China Caixin Services PMI (Jun)
UTC+8 14:45 France Industrial Output MoM (SA) (May)
UTC+8 16:00 Eurozone Service Final PMI (Jun)
UTC+8 16:30 U.K. Markit/CIPS Services PMI Final (Jun)
UTC+8 17:00 Eurozone PPI MoM (May)
UTC+8 22:00 U.S. Factory Orders MoM (May)
UTC+8 02:00 The Next Day: The Federal Reserve releases the minutes of its monetary policy meeting
UTC+8 04:00 The Next Day: New York Fed Chairman Williams participates in the discussion at the 2023 annual meeting of the Central Bank Research Association (CEBRA)
UTC+8 04:30 The Next Day: U.S. API Crude Oil Stocks for the Week Ended June 30
