Oil falls as OPEC+ proceeds with September output increase

Saudi Arabia has cut spending enough this year and probably won’t need to make further fiscal adjustments even if crude oil prices weaken, according to the International Monetary Fund.

The kingdom said in late 2024 it would trim 2025 expenditure to 1.285 trillion riyals ($342 billion) after previously overshooting on its targets in a bid to drive progress on its plans to diversify the economy.

While the government has made cuts, expenditures are likely to be higher than budgeted and some one-off spending will continue, according to Amine Mati, the IMF’s Saudi mission chief.

The Washington-based lender sees Saudi Arabia’s fiscal deficit rising to 4% this year, a level Mati describes as “quite appropriate” given the country’s adequate level of foreign reserves. The Saudi government’s own projection is for a shortfall of 2.3% this year.

“We don’t think any more action on spending cuts or fiscal adjustment are needed for this year,” even if oil prices fall to $60 a barrel, Mati said in an interview with Bloomberg. Global benchmark Brent is currently trading below $70 as the Organization of the Petroleum Exporting Countries hikes output, and many forecasters including Goldman Sachs Group Inc. see a further slide toward $60 later in the year.

In a scenario where oil prices decline significantly and permanently, the IMF would recommend a “more aggressive fiscal consolidation strategy,” according to a report released on Monday.

The Middle East’s biggest economy is spending heavily on Crown Prince Mohammed bin Salman’s Vision 2030 strategy, which includes major infrastructure projects and an overarching goal of weaning the economy off its reliance on crude oil revenues. It has said it’s running deeper budget deficits by design as it seeks to progress that strategy and is borrowing heavily in the meantime to finance the shortfall.

Already this year, Saudi Arabia has sold almost $15 billion of sovereign debt in dollars and euros. The IMF’s baseline scenario sees the kingdom continuing to take on debt, increasing the debt-to-GDP ratio to almost 41% by 2030, from below 30% now. That’d still be low by global standards.

The focus for Saudi Arabia going forward should be on reducing current expenditures that are deemed low priority and have a limited long-term fiscal multiplier, such as some spending on goods and services, the IMF said in its Article IV report.

“The view that we have on recalibration is to make sure that spending is efficient and is aligned with priority project and overheating, and not a recalibration that is done because oil prices are lower than initially thought,” Mati said.

More clarity is also needed for investors, especially those sitting abroad, after signs that some repriorization in Saudi Arabia has happened, he added. “It’s very important to clearly communicate and explain to market and investors what are the new spending plans, and what projects are kept. This is a recommendation that we keep making.”

The IMF expects the Saudi economy to grow 3.6% this year, supported by the phase-out of OPEC+ production cuts. Non-oil growth is seen converging toward 3.5% in the medium term as non-oil private investment steadily grows, including through contributions from the Public Investment Fund.

Mati said the PIF is expected to continue spending at least $40 billion a year on some of the domestic investment and projects that are already part of Vision 2030. “This is going to help keep growth positive and robust compared to what’s happening elsewhere.”

Source: Bloomberg Europe

The Euro to Dollar exchange rate (EUR/USD) could cross 1.16 again this week as momentum sways away from the Dollar back to the Euro.

Friday's 1.52% gain in EUR/USD was impressively strong, and might just be enough to shift the underlying technical structure from the downside to the upside.

To be sure, there is more work to be done; for instance, a close above the nine-day exponential moving average (EMA), to confirm the near-term trend has turned bullish again.

Above: EUR/USD at daily intervals.

And, the chart shows that the 1.16 graphical resistance line is back in play Monday, which could thwart upside in the coming hours and early stages of the week.

Yet, despite some near-term hurdles, we think they are relatively minor, and suspect the fundamental backdrop and the strength of the move on Friday will prove enough to allow further near-term gains, with a drift above 1.16 likely in the coming days.

The trigger behind the lift in EUR/USD was the stock market fall that followed Friday's U.S. labour report that showed just 73K non-farm jobs were added in July, disappointing versus the 104k median expected by analysts.

"Quite a brutal non-farm payrolls report all in," says Sam Hill, Head of Markets Insights at Lloyds Bank. "Revisions were sharply lower. They slashed jobs growth in June to 14k from the 147k initially reported and left the cumulative two-month revision 258k jobs lower. Revisions over the first half of the year now sum to -461k."

These data send the sober message that the U.S. economy could yet feel the impact of a destabilising six months of frantic policy adjustment in the U.S. under its new president. The most important development is, of course, the imposition of import tariffs to levels last seen in the 1930s.

"We remain constructive toward EUR-USD over the medium term. The factors behind the USD weakness that has emerged so far this year remain alive. And kicking," says Roberto Mialich, FX strategist at UniCredit.

Tariffs will have the effect of raising inflation and forcing readjustments amongst domestic businesses. But, from a market perspective, the more significant development is that this still-high inflation limits the Federal Reserve's ability to cut interest rates.

Sure, the Fed will probably cut rates in September following this jobs report, but it will still be constrained by inflation going forward.

Since 2008 investors have known they can count on the Fed to jump in and support them on the first signs of danger. But we are in a world now where inflation is uncomfortably high, limiting the Fed's ability to help.

It is little wonder then that markets fell, and the Dollar was dragged down too. These data mean the end of U.S. market exceptionalism remains a theme to consider, and it is the Euro that stands to benefit the most from any rebalancing in global portfolios as international investors seek greater diversification.

"The euro remains the default option for global investors diversifying out of the USD," says Bolz. "The fiscal measures in Germany and increased European defence spending should give the EUR another boost. We therefore retain our Attractive rating on the euro," says Constantin Bolz, CFA, Strategist, UBS Switzerland AG.

Source: Poundsterlinglive

Fig. 1: US Wall Street 30 CFD Index minor trend as of 4 Aug 2025

Fig. 2: Caterpillar medium-term trend as of 4 Aug 2025

Preferred trend bias (1-3 days)

Key elements

Alternative trend bias (1 to 3 days)

Source: marketpulse

President Donald Trump plans over the next several days to name replacements for two key vacancies, one to fill a spot on the Federal Reserve and other to replace the head of the Bureau of Labor Statistics.

Both spots opened up Friday — the Fed position through the surprise resignation of Governor Adriana Kugler, and the other from Trump's stunning decision to fire Erika McEntarfer, the commissioner at the Bureau of Labor Statistics.

Trump told reporters Sunday that he is thinking of several possible candidates for the Fed spot, and that he is set to replace McEntarfer soon.

"I have a couple of people in mind," Trump said regarding the Kugler vacancy. "I'll be announcing that probably over the next couple of days."

Kugler's Fed term expired next January, but she decided to exit ahead of time. In a letter submitted Friday to Trump, Kugler gave no reason for the move, which takes effect Aug. 8.

As a Fed governor, Kugler was a permanent voter on the Federal Open Market Committee, which sets the central bank's key funds level used as a peg for interest rates across the U.S. economy. In addition, governors help craft banking regulations.

During her short stint, which lasted less than two years, Kugler consistently aligned herself with the policies of Chair Jerome Powell, who has been on the receiving end of frequent Trump criticism.

Trump has stated that future Fed nominees will be litmus tested for whether they will vote to lower the funds rate.

The Kugler resignation "jump-starts the Trumpification of the Fed by handing President Trump a vacancy into which he can place a potential or even a clearly designated successor to Powell as Fed chair," Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said in a note.

Potential successors include former Fed Governor Kevin Warsh, Treasury Secretary Scott Bessent and National Economic Council Director Kevin Hassett.

Controversy over jobs count

Trump sacked McEntarfer following Friday's disappointing nonfarm payrolls report. The BLS not only reported that the economy added just 73,000 jobs in July, but it also revised the prior two months' totals lower by 258,000.

In a Truth Social post Sunday, Trump alleged that McEntarfer was responsible for "the biggest miscalculations in over 50 years."

Revisions are common for monthly jobs numbers as the BLS receives more information through the survey of establishments it uses to calculate the nonfarm payrolls figure. However, as survey responses have declined over time, revisions have risen, with the BLS last year adjusting down its count for the 12-month period preceding March 2024 by 818,000.

McEntarfer's firing has drawn widespread criticism due to worries that the move could politicize the BLS statistics, which are used to set policy and as a barometer for multiple aspects of the economy.

"Potential politicization of the Fed has been much discussed over the past several months, but the risk of politicizing the data collection process should not be overlooked," wrote Michael Feroli, chief U.S. economist at JPMorgan Chase. "To borrow from the soft-landing analogy, having a flawed instrument panel can be just as dangerous as having an obediently partisan pilot."

Trump has not public discussed potential replacements for McEntarfer. Deputy Commissioner William Wiatrowski is serving in an acting role now.

Source: CNBC

Stocks Slide as Weak Jobs Report Sparks Economic Worries

Why Are Interest Rates Back in Focus?

Which Stocks Were Hit the Hardest?

What Should Investors Watch Now?

Source: fxempire

Source :Euronews