August 8 financial breakfast: Federal Reserve policymakers say they may raise interest rates further, gold is under pressure, and the market awaits US inflation data

On August 8, the dollar rose against major currencies on Monday, mainly due to the Federal Reserve policymakers saying that further interest rate hikes may be possible in light of high inflation and the still tight labor market, and gold prices fell. Oil prices closed 1% lower on Monday after six consecutive weeks of gains, and investors worried about softening demand.

Beijing time on Tuesday (August 8), the dollar rose against major currencies on Monday, mainly due to the Federal Reserve policymakers said that given the high inflation and the labor market remains tight, there may be further interest rate hikes, gold prices fell; oil prices closed down 1% on Monday after six consecutive weeks of gains, investors worried about softening demand.Commodity closing situation:US gold futures closed 0.3 per cent lower at $1970.00. Brent crude futures closed 1.04 per cent lower at $85.34 a barrel. US crude futures closed 1.06 per cent lower at $81.94.

US stock market closing:The Dow Jones index closed up 1.16% at 35,473.59; the S & P 500 index closed up 0.89% at 4,518.08; the Nasdaq Composite index closed up 0.61% at 13,994.40.

Tuesday Forward

Precious metal

Gold prices fell on Monday after Federal Reserve Governor Bowman said further interest rate hikes may be needed to curb inflation.

In a speech prepared for the "Fed Listens" event in Atlanta, Ms. Baumann heavily repeated a speech she gave to a banking group on Saturday, saying she supported the latest rate hike last month because inflation was still too high.

"The dollar index and US Treasury yields rose slightly as a result, and gold futures responded muted to falling," said Phillip Streerial, chief market strategist at Blue Line Futures in Chicago. "If we see lower-than-expected consumer price index (CPI) data and some of the Fed policymakers may stop their hawkish expectations for rate hikes, we have a better chance of seeing some stabilisation in gold prices."

According to the New York Times, New York Federal Reserve President John Williams expects interest rates to start falling next year. This week's focus will be on Thursday's U.S. CPI data, which could provide more clarity on the Fed's policy stance.

Silver fell about 2.2% to $23.09 an ounce; platinum fell 0.1% to $920.89. Palladium fell 1.2% to $1,241.20.

crude oil

Oil prices closed 1 per cent lower on Monday after six straight weeks of gains amid concerns about softening demand, which analysts pointed to as the US summer driving season was coming to an end in early September and weaker-than-expected demand from China.

"The summer driving season in the US is coming to an end," said John Kilduff of Again Capital. "If you don't need as much gas, you don't need as much oil."

Polish pipeline operator PERN said it expected a pipeline carrying oil to Europe to resume operations on Tuesday, easing concerns about tight supplies.

PERN suspended pumping through one section of the Druzhba pipeline in central Poland after detecting a leak on Saturday.

Saudi Arabia, the world's largest oil exporter, announced last week that it would extend production cuts until the end of September and said further cuts were possible after that. To match the cuts, Saudi Aramco on Saturday raised the official price of most grades of oil it sells to Asia in September, the third consecutive month of price increases.

Investors will also be watching Thursday's U.S. Consumer Price Index (CPI) for clues about the path of the Federal Reserve's monetary policy.

foreign exchange

The dollar rallied against major currencies on Monday, mainly on the back of Federal Reserve policymakers' signals that further interest rate hikes are likely given persistently high inflation and a still tight labor market.Bowman, the governor of the Federal Reserve, said on Monday that further interest rate hikes may be needed to drive inflation down to the central bank's 2 percent target.

In remarks prepared for the "Fed Listens" event in Atlanta, Ms Bowman said she supported the latest decision to raise interest rates last month because inflation remained too high and job growth and other signs of activity suggested the economy continued to expand at a "moderate pace".

In an interview with The New York Times on Monday, Mr. Williams, the president of the New York Fed, said the Fed needed to maintain a restrictive stance for some time, adding that maintaining it would depend on fundamentals "driving supply and demand in the economy and inflation".

In afternoon trading, the dollar rallied 0.5 per cent to 142.45 against the yen from a one-week low hit at the start of the session. The greenback edged higher at 0.8731 against the Swiss franc. The dollar index was little changed at 102.03, having hit a one-week low on Friday after a weaker-than-expected US non-farm payrolls report.

Jeff Klingelhofer, portfolio manager and co-head of investments at Thornburg Investment Management, said he believes the dollar will maintain its gains in the short to medium term.

Mr. Klingelhofer said: "I would expect the Fed to keep interest rates high for a longer period of time, which should support the dollar because of interest rate differentials. So a longer period of high interest rates in the US should support the dollar. I also think that if interest rates stay high, then when consumer conditions deteriorate, the recession will inevitably deepen. Then you get safe-haven inflows, which will support the dollar a lot."

The Federal Reserve announced late last month that it would raise its target range for benchmark interest rates by 25 basis points to 5.25% -5.50%. Investors widely believe that this will be the last rate hike in the Fed's operation that starts in March 2022.

In other currencies, the euro fell to $1.1006 against the dollar, and Monday's data showed that German industrial production fell more than forecast in June, falling 1.5% from the previous month.

Investors are also starting to look at upcoming US inflation data, which on Thursday is expected to show core prices rose 4.7 per cent year-on-year in July.

Sterling rose 0.3 percent to $1.2783 against the dollar after the Bank of England raised interest rates by 25 basis points to a 15-year high of 5.25 percent on Thursday.

Market News

San Francisco Federal Reserve Research Report: U.S. Home Price Growth Could Turn Negative Next Year

Housing inflation, the largest component of the US consumer price index (CPI), is set to slow significantly and could even turn negative next year, according to a research report released by the Federal Reserve Bank of San Francisco on Monday (August 7). Benchmark forecasts suggest that housing inflation will continue to slow year-on-year until the end of 2024, and may even turn negative by mid-2024, which would represent a sharp reversal of housing inflation and have an important impact on overall inflation. Housing costs account for more than 40% of the US core CPI basket. Previously, the so-called core inflation measure, which excludes volatile food and energy prices, has been slower to decline, leading to concerns that the Federal Reserve may need to raise interest rates further to bring inflation down to its 2% target.

Federal Reserve Governor Bowman: Further rate hikes may be needed to meet inflation target

Bowman, the Fed governor, said she supported the latest rate hike last month because inflation remained too high and job growth and other signs of economic activity showed the economy continued to expand at a "moderate pace". She expects further rate hikes may be needed to bring inflation down to target. And as she considers whether further increases in the federal funds rate are needed and how long it needs to remain at a sufficiently restrictive level, she will look for evidence that inflation is on a sustained and meaningful downward path.

Subsidy cuts looming, Russia's oil processing volumes rise in early August

Russian refineries increased their crude oil processing rates in the first few days of August as state subsidies are set to be halved from September. A person familiar with the matter said primary processing averaged 5.64 million barrels per day between August 1 and 2. That is about 24,000 barrels more than the average daily output for most of July. Oil market watchers are closely monitoring Russia's crude oil supplies to domestic refineries as well as seaborne exports to track the country's production trends. Russian Deputy Prime Minister Alexander Novak said last week that in addition to limiting output, Russia will voluntarily reduce exports this month and next. And in order to limit budget spending, subsidies paid for domestic diesel and gasoline supplies will be halved from September this year to 2026.

Adviser to the Director of the Office of the President of Ukraine: Kiev opposes any ceasefire plan under the current circumstances

On August 7 local time, Podoliak, advisor to the head of the Ukrainian president's office, posted on social media that it is impossible to negotiate with Moscow, and Kiev opposes any ceasefire plan because it would mean a de facto victory for Russia. Podoliak believes that under the current circumstances, any ceasefire and freezing of the Russian-Ukrainian conflict plan only means a de facto victory for Russia. He stressed that there can be no negotiation process in the current situation, and Ukraine needs more weapons, missiles and aircraft.

A number of car companies have announced price cuts, and the "price war" in the car market may start again in the second half of the year

Since August, a number of car companies have joined the army of price cuts through official drops, new car discounts, end point profits and other forms, covering more than 20 models, with prices ranging from 50,000 yuan to 300,000 yuan. According to the China Automobile Dealers Association, after three consecutive months of decline in the inventory index of domestic dealers, the inventory warning index of dealers rebounded to 57.8% in July. At the same time, under the background of continuous decline in transaction prices, 32.7% of dealers have raised their sales targets for the second half of the year, which means that the sales pressure in the domestic automobile market has intensified, and a new round of "price war" may be reopened.

The Bank of America team has warned that the global bond market will face challenges, sharply raising expectations for US bond yields

The Bank of America's global interest rate research team has warned of challenging times ahead for the global bond market. The team has raised its forecast for bond yields in light of expectations of economic resilience and monetary policy. The forecast for US Treasury yields has been "significantly revised up", with the 2-year Treasury yield expected to reach 4.75% by the end of this year (previously 4.25%); and the 10-year Treasury yield expected to reach 4.4% by the end of 2023 (previously 3.5%). This comes after Bank of America economists abandoned "long-standing US recession forecasts, arguing that the US economy will have a soft landing and a growth recession". The Federal Reserve will raise interest rates by another 25 basis points later this year, which is still the bank's base forecast, but the bank "expects to cut rates much more slowly next year". In the eurozone, the 10-year Bund yield is expected to "peak above 2.6% in the short term, then fall to 2.4% by the end of the year (previously 2.25%) and 2% by the end of 2024 (previously 1.9%).