Markets
Today’s empty eco calendar set the stage for media to contemplate on yesterday’s themes. The moderate July inflation report, without clear signs of tariff-related price pressure, Trump’s latest rant against Fed Chair Powell and the crazy idea to replace monthly US payrolls reports with a quarterly report until the figures all more moderate all passed the stage. Luckily, there was an interview with US Treasury Secretary Bessent on Bloomberg to break the summer lull. Bessent reiterated yesterday’s call that the Fed should deliver a 50 bps rate cut when it meets next in September. First because there’s no evidence of significant inflation coming from the protectionist hawkish US trade policy. Second because Bessent believes that the Fed would have already acted in June and/or July if the (payrolls) data were accurate at the time. Recall that the May and June numbers faced a combined downward revision of 258k at the July payrolls release. Bessent believes that the Fed should enter a series of rate cuts which brings the Fed rate 150-175 bps below current levels. While we don’t side with the total magnitude of policy easing, we do side with the argument that once the Fed engages in additional rate cuts, they should/could opt for a bigger start. The Powell Fed has a history of waiting until they are absolutely convinced about something and then opting to move quickly. They did so during the tightening cycle, battling inflation, and they did so a year ago when there were signs of a sudden cooling of the US labour market and economy. In this respect, it’s telling that US money markets in the wake of the Bessent interview for the first time discounted (marginally) more than a 25 bps rate cut in September. We’d err on the side of this positioning the be extended if tomorrow’s (producer price inflation, weekly jobless claims) or Friday’s (retail sales, empire manufacturing survey, University of Michigan consumer confidence) shows signs of weakness. An outperformance at the front end of the US Treasury curve can in such scenario push EUR/USD for a test of the YTD top at 1.1829. Looking forward to next week, Fed Chair Powell addresses the annual Kansas City Fed symposium in Jackson Hole, a venue which in the past served as platform for Fed leaders to prepare for important near term policy terms.
News & Views
The International Energy Agency (IEA) in its monthly Oil Market Report projects global oil demand to increase by 680 kb/d this year and by 700 kb/d in 2026 to reach 104.4 mb/d. Global oil demand growth for 2025 has been repeatedly downgraded since the start of the year, by a combined 350 kb/d. Consumption in emerging and developing economies has been weaker than expected. Aviation has been an exception, with robust summer travel propelling jet fuel demand to all-time highs in both the US and Europe. The demand forecast compare with yesterday bullish OPEC outlook of 1.3 mb/day oil demand growth this year and 1.4 mb/day next year. Global oil supply growth has been revised up by 370 kb/d to 2.5 mb/d this year and by 620 kb/d to 1.9 mb/d in 2026, after the eight OPEC+ members subject to voluntary output reductions agreed to raise production by another 547 kb/d in September, fully unwinding the 2.2 mb/d cuts agreed to in November 2023 since April. While oil market balances look ever more bloated as forecast supply far eclipses demand towards year-end and in 2026, additional sanctions on Russia and Iran may curb supplies from the world’s third and fifth largest producers.
Preliminary data showed Polish GDP growing by 0.8% Q/Q in the second quarter, to be 3.4% higher on an annual basis. Details will be published on September 1st. The Polish government expect 2025 GDP growth to be 3.4%. Polish markets didn’t react with EUR/PLN locked in a tight 4.25-4.30 range since mid-April. The Polish economy outperforms local peers like Czech Republic or Hungary who reported figures earlier. The Czech economy grew by 0.2% Q/Q and 2.4% Y/Y with Hungarian GDP numbers coming in at 0.4% Q/Q and 0.1% Y/Y.
