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August 24. It will take Germany years to switch to Canadian gas

German Chancellor Olaf Scholz said that Germany intends to move away from Russian natural gas as soon as possible and switch to Canadian. Earlier, the Prime Minister of Canada has already noted that LNG exports to Germany are possible.

However, despite Canada's willingness to partner with Germany, experts doubt that additional gas shipments may arrive from there in the near future due to the lack of export capacities.

Currently, Canada does not have the infrastructure to export gas abroad – the country is currently only building 2 terminals on the west coast. But it will take at least 3 years to complete the construction of the first terminal, and by that time Europe will have already abandoned Russian fuel. Therefore, it would be more realistic for Germany to turn to countries such as Norway for gas.

Since the introduction of sanctions against Russia, Canada has stated that it has the ability to produce an additional 200,000 barrels of oil and 100,000 barrels of natural gas per day, but due to the lack of infrastructure for export abroad, the vast majority of this fuel is purchased by the United States, which has become the world's largest supplier of LNG.

Before the start of the special operation in Ukraine, Russia supplied 32% of the LNG consumed by Germany. Due to European sanctions, Germany has become one of the countries that have suffered the most due to Europe's rejection of Russian energy resources.

 

August 26. Macroeconomic events of the day | August 26

On Friday, all the attention of the markets is focused on the speech of the head of the US Federal Reserve Jerome Powell at the symposium in Jackson Hole. It is expected that the regulator will confirm its intention to curb inflation, but will not announce the details of its next steps. Many expect an interest rate increase of another 0.75 percentage points in September, while others expect a smaller increase, by half a point.

Powell's speech will take place after the publication of a block of economic data, including on the PCE index, as well as on the expenses and incomes of Americans.

PCE Index

The Personal Consumption Expenditure Index (PCE), the Fed's most preferred inflation indicator, will be published at 12:30 GMT. Analysts expect the underlying PCE to increase by 4.7% compared to last year and by 0.3% compared to the previous month.

Expenses and incomes of Americans

At the same time (12:30), statistics on personal expenses and incomes of Americans will be published. Personal expenses are projected to grow by 0.4% and personal income by 0.6%.

It is noted that middle- and low-income households feel disadvantaged due to rising prices for all basic goods, so they are forced to reduce their expenses. At the same time, retailers are lowering prices to get rid of inventory in preparation for the holiday season.

Powell's performance at Jackson Hole

Despite general expectations, the speech of the head of the Fed is unlikely to bring any specifics to the market. Moreover, before the regulator announces its next decision on the rate, several more important economic data will be published, including inflation and the employment report.

 

August 29. Powell's speech provoked the growth of the dollar

On Monday, the US dollar reached a 20-year high against major currency competitors after the speech of the head of the US Federal Reserve Jerome Powell at a symposium in Jackson Hole on Friday. The dollar index peaked at 109.48 points today.

In particular, Asian currencies fell: the Chinese yuan reached a new 2-year low of $6,9321, and the Japanese yen fell to 138.88 against the dollar. The Australian dollar fell to $0.6858, and the New Zealand dollar fell to $0.6109. Paired with the European currency, the dollar rose to $0.9944.

The head of the US regulator said that the Fed does not plan to make «dovish» changes to its rhetoric and intends to further raise the base rate to combat rampant inflation. Powell also warned that the growth of the US economy could be undermined by a rate hike, as households and businesses will inevitably face a number of problems before consumer price growth can be contained.

After the politician's speech, an increasing number of analysts began to predict a rate hike at the September meeting by 75 basis points. The rate is expected to exceed 3% by the end of the year.

Now all the attention of the markets is focused on Friday's report on employment in the United States (Non-Farm Payrolls). A strong report on the labor market may give the Fed additional opportunities to maintain the current pace of monetary policy tightening.

 

August 30. Oil prices are recovering moderately after yesterday's fall

World oil prices are recovering weakly on Tuesday after falling below the level of $100 per barrel. A day earlier, Brent was trading at $103.25 per barrel.

The possible prospects for a reduction in oil supply and a decrease in demand in the markets led to an increase in prices yesterday. Investors' fears intensified after the statement by the Saudi Energy Minister that OPEC may cut production.

At the same time, expectations of an increase in demand appeared after the statement of the famous entrepreneur Elon Musk that humanity may soon need more oil and gas, since without fossil energy carriers «civilization will collapse.»

In addition, the situation in Libya affects the dynamics of the oil market. Over the weekend, clashes between two armed groups took place in Tripoli, as a result of which more than 30 people were killed. This has raised fears that Libya is waiting for another full-scale conflict, as a result of which oil supplies to the world market will be reduced.

Meanwhile, the volume of production in the country remains at the same level of 1.2 million barrels per day, as reported by the state-owned Libyan oil company National Oil Corp.

 

August 31. Inflation in the eurozone in August reached a record 9.1%

According to the Statistical Office of the European Union, consumer prices in the eurozone increased by 9.1% in annual terms in August. In July, the price increase was 8.9%, so inflation accelerated again and updated the maximum since the beginning of calculations.

The fresh indicator exceeded the forecasts of analysts who expected less significant growth – by 9%. Inflation exceeds the European Central Bank's target of 2% by more than four times.

The CPI index (consumer prices excluding food and energy) in August increased by 4.3% year-on-year compared with 4% in July.

Energy resources increased in price by 38.3% compared to August last year, but the growth rate slowed down slightly compared to the rise of 39.6% a month earlier. Food, alcohol and tobacco rose by 10.6% (by 9.8% in July), industrial goods – by 5% (by 4.5%), services – by 3.8% (by 3.7%).

On a monthly basis, consumer prices increased by 0.5% in August. In July, this indicator increased by 0.1%.

 

September 5. The pound has collapsed to its lowest since 1985

On Monday, the British pound collapsed to its lowest since 1985. At the moment, the exchange rate of the GBP/USD currency pair fell to the level of $ 1.1444, losing 0.55%.

The main pressure on the pound sterling is exerted by the current strengthening of the US dollar, as well as the economic situation in the UK itself. Analysts fear that due to the energy crisis in the country, many households will not be able to pay bills in winter.

In addition, doubts about the ability of the Bank of England to cope with record inflation are another factor for the weakening of the British currency. Experts expect that inflation in the UK will reach 22% next year due to an increase in the cost of energy resources, which could lead to a fall in the economy by 3.4%.

Additional pressure on the pound is exerted by uncertainty about the economic policy of the new British Prime Minister Liz Truss. Today it became known that Truss, the British Foreign Minister, was elected head of the Conservative Party and prime Minister of the country. Truss scored 81.3 thousand votes, thus overtaking ex-Finance Minister Rishi Sunak, for whom 60.4 thousand people voted.

 

September 6. The pound is growing on the promises of the new British Prime Minister

The British pound is rising on Tuesday after the publication of more detailed information about how Liz Truss, who became the new prime minister of Britain, intends to deal with the energy crisis in the country.

It is reported that in October, electricity and heating tariffs for households were supposed to be increased by 80%, but Truss promised that she was going to freeze tariffs for this winter. And this may cost the country's budget more than the employment support program during the pandemic.

As a result, the British pound managed to move away from the lows of 1985, which the currency approached during yesterday's trading ($ 1.1444 per 1 pound). The current quote of the GBP/USD pair is $1,1609. At the same time, analysts note that the pound continues to remain near the lows for 2.5 years amid concerns about the price that the UK will have to pay for the support of the population.

It is worth noting that the country's public debt has already grown to almost 100% of GDP from 80% before the pandemic. In general, during the pandemic, sterling declined against the US dollar by 15%, the annual inflation rate exceeded 10%, and economic growth almost stopped.

During her election campaign, Truss hinted at lower taxes, which led to a decline in UK government bonds. In August, the drop in their prices was the deepest in several decades, because investors feared a balance of payments crisis.

 

September 7. Macroeconomic events of the day | September 7

The US stock market is declining on Wednesday after the end of the Labor Day holiday weekend. Investors are waiting for new economic data and comments from representatives of the US Federal Reserve System this week.

The next Fed meeting will take place only at the end of the month, but some Fed officials are expected to speak this week, including Jerome Powell. The Fed's Beige Book (economic summaries of regional banks) will be published today.

Market participants expect that the US regulator will continue to raise the rate by another 0.75 percentage points to combat high inflation.

What should I pay attention to today:

The Fed's beige book.

The periodic report of 12 regional banks of the Federal Reserve will give an idea of what is happening in manufacturing, services and other business sectors, as well as consumer behavior. The beige book will be published at 18:00 GMT.

The decision of the Bank of Canada on the rate

Another interesting event of the day will be the meeting of the Board of the Bank of Canada. The regulator is expected to raise the refinancing rate from 2.5% to 3.25%. Such a sharp increase could lead to a steady increase in the Canadian dollar.

Eurozone GDP

Gross domestic product in the eurozone increased by 0.8% in the second quarter of 2022, which exceeded the growth of 0.6% according to the second estimate and was the highest growth rate in three quarters. Despite the current growth, the energy crisis in Europe continues to cause alarm, as the region is cut off from a key natural gas pipeline just a few weeks before the onset of cold weather.

 

September 8. Truss will freeze gas and electricity bills for two years

The new British Prime Minister Liz Truss has revealed the details of her energy plan: from October 1 and for two years, energy prices will be frozen. Now the average annual gas and electricity bill will not exceed 2,500 pounds.

The envisaged measures will cost the UK budget about 150 billion pounds ($172 billion). At the same time, Trass has not yet announced exactly how this assistance program will be funded.

Given that the new Prime Minister is actively in favor of reducing taxes on the population and has repeatedly spoken out against the introduction of a tax on excess profits of companies, it can be assumed that covering the difference between real energy prices and the amount that will be charged to citizens will be at the expense of government loans. In the future, they will be paid over the next 10-20 years by adding to consumers' energy bills.

According to Truss, the new measures will save each household a thousand pounds. The country already has support measures in the form of a discount on energy bills in the amount of 400 pounds this winter, which was announced under the previous British Prime Minister Boris Johnson.

 

September 9. The London Stock Exchange stopped trading after the death of Elizabeth II

Last night, the London Stock Exchange stopped trading after the news of the death of Queen Elizabeth II appeared. Trading should recover on September 9. In addition, the country's parliament, the government, as well as the legislative bodies of Scotland, Wales and Northern Ireland have also suspended their work.

Queen Elizabeth II of Great Britain has died at the age of 96, according to Buckingham Palace. Elizabeth became Queen in 1952, and this year she celebrated the 70th anniversary of her reign, the longest in the history of the country.

The new king of the country was the son of Elizabeth II, 74-year-old Prince Charles. The new British monarch will rule under the name Charles III.

The Bank of England announced that banknotes with the image of Elizabeth II will remain legal tender.

The British pound reacted to the news of the Queen's death by rising to the level of 1.1609. A little earlier, on the news about the deterioration of the Queen's physical condition, the British FTSE 100 index also started to grow, to the level of 7,382.60.

 

September 12. Economic events of the day | Great Britain

Monday started with a block of data from the UK – on the country's GDP and industrial production.

According to the country's national bureau of Statistics, the British economy grew by 0.2% in July, while analysts had forecast growth of 0.4%. It is noted that such a decrease was the result of a reduction in energy generation as a result of tariff increases in the country. In June, the UK economy shrank by 0.6%.

The volume of industrial production in July decreased by 0.3% compared to June. Analysts believed that the indicator would increase by 0.4%. In annual terms, industrial production increased by 1.1%, while experts expected an increase of 1.9%.

In June, industrial production decreased by 0.9% on a monthly basis, and increased by 2.4% on an annual basis.

In August, the Bank of England predicted that a recession would begin in the British economy at the end of this year, which would last until the beginning of 2024. Last week, the new Prime Minister of Great Britain, Liz Truss, announced a massive program of support for the population, promising to limit electricity and heating tariffs. It is reported that this program will cost the country's budget 100 billion pounds or more, which will further worsen its condition.

 

September 13. Gold declines after the release of US inflation data

The price of gold fell sharply on Tuesday after the publication of inflation statistics in the United States. Annual inflation in the country decreased to 8.3% in August after 8.5% in July. Analysts predicted an even bigger decline – up to 8.1%. The fact that the current indicator fell short of forecasts caused expectations of an even tougher approach of the US Federal Reserve System to monetary policy.

The daily minimum price for December gold futures was $1,706.95; the asset collapsed from the level of $1,742.75 per ounce. December silver futures are down 1.05% to $19.652 per ounce.

Analysts note that additional tightening of monetary policy in the United States will be positive for the dollar and the yield of the US government debt and negative, respectively, for commodities and assets used as a «safe haven». According to experts, 82% of analysts already expect the Fed's discount rate to increase by 0.75 percentage points, to 3-3.25% per annum.

Analysts are also confident that a rate hike in September is already a settled issue. Moreover, in November, the rate cut will most likely not happen.

 

September 14. Oil declines on U.S. inventory data

World oil prices are declining on Wednesday morning amid a significant increase in its reserves in the United States.

According to the American Petroleum Institute (API), commercial oil reserves in the country unexpectedly jumped by 6 million barrels. At the same time, analysts expected a decrease of 200 thousand.

The publication of the IEA report and statistics from the Ministry of Energy of the country is expected this evening. If the official report confirms the growth of reserves, oil quotes will continue their decline.

On Wednesday morning, Brent quotes are near the level of $92.50 per barrel, having declined from the area of $93.80. The cost of North American WTI oil hovers at $87 per barrel.

In addition to the data on reserves, the upcoming speech by the President of the European Commission, Ursula von der Leyen, who is going to present a number of proposals to contain the oil crisis in her speech to the European Parliament, may have an impact on the dynamics of the market.

 

September 15. Ethereum has completed a long-awaited upgrade to its system

Ethereum has completed an important long-awaited upgrade to its system – The Merge. It involves the transition of the altcoin from the Proof-of-Work protocol to Proof-of-Stake (PoS). This means that now the security of the blockchain will be provided not by miners, but by validators – users who have deposited and blocked their share of coins (stacking).

The main purpose of the update is to reduce the problems associated with the growth of the users number. The hard fork is aimed at increasing the speed, efficiency and scalability of the cryptocurrency network so that it can process more transactions and provide a higher level of protection.

The Merge has been in preparation for six years, and many consider it an important milestone in the history of cryptocurrency due to the potential material and ideological consequences. The update should show that a decentralized and public network can work in the most energy efficient way.

In addition, the transition to a new environmentally friendly Proof-of-Stake model will lead to a reduction in the impact on the environment. The new protocol will consume 99.95% less energy than the current mining model. Moreover, the transition of Ethereum to the Proof-of-Stake concept does not involve the use of video cards for mining. And this will lead to a further reduction in prices for graphics accelerators.

 

September 19. Bitcoin is aiming for 2020 lows

During Monday's trading, the bitcoin exchange rate dropped to $18,313 for the first time since the end of 2020. Pressure on the cryptocurrency is exerted by investors' withdrawal from risks before the meeting of the US Federal Reserve System scheduled for Wednesday.

Most analysts expect that the US regulator will raise the base interest rate by 75 basis points for the third time in a row, or even by 100 bp at once.

The current quote of the BTC/USD pair is $18,756.90. Since the beginning of this year, bitcoin has fallen in price by 60% and is currently trading at the level of December 2020.

In the current conditions, risk appetite remains extremely weak, and the entire crypto market is showing a decline following the fall of stock markets. Additional pressure on the market is being exerted by signals that the administration of US President Joe Biden plans to tighten regulation of the cryptocurrency industry.

It's not just bitcoin that is falling today. The cost of the second most popular cryptocurrency, Ethereum, is also declining and is at its lowest level since July. The current price of ether is $1,280. Last week, an update of the cryptocurrency software, called The Merge, was carried out on the Ethereum network. This update has transferred the ether blockchain to a new algorithm, which will dramatically reduce electricity consumption during mining.

 

September 22. The Bank of England raised the rate by 50 basis points to 2.25%

Following the results of the September meeting, the Bank of England decided to raise the base interest rate from 1.75% to 2.25% per annum. This decision completely coincided with analysts' expectations.

Thus, the rate in the UK has reached its maximum since 2008. Experts note that the rate was raised following the results of the seventh meeting in a row, and the second meeting in a row the increase was 50 basis points.

All nine members of the Monetary Policy Committee (MPC) voted unanimously for the rate increase. Moreover, five were in favor of a 50 bps rise, three were in favor of a 75 bps increase, and one voted for a 25 bps increase.

In addition, the leadership of the British regulator voted to begin reducing the volume of government bonds on the balance sheet of the central bank. Now the volume of government bonds at the disposal of the Bank of England will be reduced by 80 billion pounds over the next 12 months and will reach 758 billion pounds.

 

September 23. Gold prices fell to a 2-year low

According to trading data, gold prices have fallen to the lowest levels in more than two years. December gold futures on the New York Mercantile Exchange COMEX collapsed from the level of 1.682 to 1.648.60 per ounce. The last time gold was traded at such levels was in April 2020.

Analysts note that the precious metal quotes are declining for the second week in a row after many central banks around the world raised interest rates to curb inflation.

In particular, the US Federal Reserve, as well as the Central Banks of Switzerland, Norway and the UK announced an increase in interest rates to curb price growth. And as we know, gold, which is traded in the US currency and does not bring any guaranteed interest income, usually has a negative correlation with the dollar exchange rate and rates.

Experts suggest that the negative dynamics in the gold market is very likely to continue due to further tightening of monetary policy by some major central banks. Because against the background of higher rates, the costs of owning gold are growing.

At the same time, fears of a recession and any escalation of the conflict in Eastern Europe may support the prices of the precious metal.

 

September 26. The yield of 10-year British government securities rose to the highest since 2008

Yields of British government securities are rising at the beginning of a new trading week: on Monday, the yield of ten-year bonds rose to 4.246% compared with 3.827% at the close of the market on September 23, which was the highest since 2008. The yield on two-year government securities rose to 4.418% from 3.911%.

The growth is supported by expectations that the Bank of England will have to sharply raise the rate, as the large tax incentives announced by the government last week will inevitably lead to a further increase in inflation.

On September 23, British Finance Minister Quasi Kwarteng announced a large-scale tax cut that will affect individuals and legal entities. It is expected that these measures will increase the budget deficit in the current financial year by more than 70 billion pounds. At the same time, the minister clarified that he does not exclude further tax breaks.

The stimulus measures of the new UK government will require an increase in the issuance of government bonds, which is one of the factors pushing down their value.

Market participants expect the Bank of England to raise the base rate by 100 basis points at the November meeting. However, there is an opinion that the Central Bank may raise the rate until November, in an attempt to contain the fall in the national currency. An increase in interest rates may exacerbate difficulties in the economy, since the tightening of monetary policy reduces the disposable incomes of the population and leads to an increase in the cost of mortgages.

 

September 27. Iraq: oil may rise to $150 per barrel

The price of oil on the world market may reach $150 per barrel in the coming months. This was stated by Iraqi Foreign Minister Fuad Hussein in an interview on the sidelines of the UN General Assembly.

And there are significant risks here: if oil prices rise in winter, it will hit the economies of countries that do not produce oil. In addition to the seasonal factor of rising prices for hydrocarbons, the Iranian politician noted the impact of anti-Russian sanctions on the cost of oil.

On Tuesday, the commodity asset is steadily growing after yesterday's fall to the level of $82.46: the current Brent quote is $85.54 per barrel. The driver of growth is concerns due to a reduction in supply on the market.

Also, traders continue to monitor the gathering strength of Hurricane Jan in the Gulf of Mexico. Chevron Corp has already announced the suspension of the operation of two production platforms, the total production volume of which is about 120 thousand barrels per day. British BP also intends to close two platforms in the region, the production volumes at each of which exceed 100 thousand barrels per day.

In addition, the decision of the OPEC+ countries to reduce the volume of oil production, as previously repeatedly stated by representatives of the alliance, can support oil prices. In particular, in order to maintain prices at $90 per barrel, OPEC will need to reduce production by 1 million b/d. In the meantime, the organization can reduce production by at least 500 thousand b/s.

 

October 3. The pound rose sharply after the British authorities rejected the budget plan

The pound jumped sharply on Monday after the British government announced the cancellation of a plan to reduce taxes for the rich, which was a shock to the market and scared investors.

British Finance Minister Kwasi Kwarteng said today that the government is ready to abandon the plan to abolish the 45% maximum income tax rate. Against this background, the pound reached $ 1.1263 in a pair with the US dollar.

Last Monday, the British currency fell to a record low of 1.0356. Investors were scared by the fact that tax cuts would spur inflation and lead to an even faster increase in the interest rate. And this will undermine the already struggling UK economy.

Several members of the ruling Conservative Party also opposed the tax reduction program. Citizens themselves also spoke out against it, judging by the results of public opinion polls.

Earlier, the International Monetary Fund also sharply criticized the new fiscal package, which includes the rejection of the planned increase in the social security tax rate and a reduction in the tax on the purchase of real estate below 250 thousand pounds. Representatives of the IMF said that this would contradict the tightening of the monetary policy of the Bank of England.