A new Bloomberg survey revealed on Tuesday that OPEC’s crude oil production fell by 70,000 barrels per day in August, to 27.06 million barrels daily. The loss was due to Libya’s production hiccup, which saw a dip of 150,000 bpd. Meanwhile, the survey showed that Kuwait and Nigeria both increased production.

Libya’s production losses are currently much more significant than 150,000 bpd. But the steep losses are recent and didn’t affect most of the month. Current production losses have been estimated at anywhere from 500,000 bpd to 700,000 bpd, with a new force majeure placed on the El Feel field.

The largest member of the OPEC group, Saudi Arabia, complied with its quota for August as expected. Iraq, on the other hand, has again failed to cut production in line with its quota and still produced 320,000 bpd more than it had agreed to in August, according to the survey. Iraq has insisted it will engage in compensatory cuts to make up for its overproduction.

Despite the significant production losses from Libya which are not yet completely reflected in the August OPEC figures, oil prices remain on a downward spiral, sinking more than 4% on Tuesday in a market that has some traders stumped.  The overriding market fear is OPEC’s possible unwinding of its production quota beginning in October—although the group has been adamant that it will only do so if market conditions dictate that it makes sense to do so.

Source: OILPRICE

Libya’s two legislative bodies agreed on Tuesday to appoint jointly a central bank governor, potentially defusing a battle for control of the country’s oil revenue that has slashed production.

The House of Representatives based in Benghazi, in eastern Libya, and the High State Council in Tripoli in the west signed a joint statement after two days of talks hosted by the UN Support Mission in Libya.

They agreed to appoint a central bank governor and board of directors within 30 days. Libya’s central bank is the sole legal repository for Libyan oil revenue, and it pays state salaries across the country.

The two chambers also agreed to extend consultations for five days, concluding on Sept. 9.

Libya has had little peace since a 2011 NATO-backed uprising and it split in 2014 between eastern and western factions. Major warfare ended with a ceasefire in 2020 and attempts to reunify, but divisions persist.

The House of Representatives parliament and the High State Council were both recognized internationally in a 2015 political agreement, although they backed different sides for much of Libya’s conflict.

The standoff began when the head of the Presidency Council in Tripoli moved last month to oust veteran central bank Governor Sadiq Al-Kabir and replace him with a rival board.

This prompted eastern factions to declare a shutdown to all oil production, demanding Kabir’s dismissal be halted. The dispute threatened to end four years of relative stability.

Some oil output has since resumed, and oil prices dropped nearly 5 percent on Tuesday to their lowest levels in almost nine months in a sign that traders expect the latest agreement to get more oil flowing.

Libya’s central bank has been paralyzed by the battle for its control, leaving it unable to conduct transactions for more than a week. Underlying the issue is the country’s fractured political landscape of rival governing institutions with tenuous claims to legitimacy.

Source: ARAB

The Japanese Yen (JPY) continues to strengthen against the US Dollar (USD) following the release of the Jibun Bank Services PMI data on Wednesday. The index was revised to 53.7 in August from an initial estimate of 54.0. Although this marks the seventh consecutive month of expansion in the service sector, the latest figure remains unchanged from July.

Japan’s Chief Cabinet Secretary Yoshimasa Hayashi stated on Wednesday that he is "closely monitoring domestic and international market developments with a sense of urgency." Hayashi emphasized the importance of conducting fiscal and economic policy management in close coordination with the Bank of Japan (BoJ). He also stressed the need for a calm assessment of market movements but declined to comment on daily stock fluctuations.

The US Dollar receives support as traders adopt caution ahead of US employment data, particularly the August Nonfarm Payrolls (NFP). This data may provide further insights into the potential timing and scale of Federal Reserve (Fed) rate cuts.

Daily Digest Market Movers: Japanese Yen extends gains due to the hawkish mood surrounding BoJ

The US ISM Manufacturing PMI inched up to 47.2 in August from 46.8 in July, falling short of market expectations of 47.5. This marks the 21st contraction in US factory activity over the past 22 months.

On Tuesday, Japan announced plans to allocate ¥989 billion to fund energy subsidies in response to rising energy costs and the resulting cost-of-living pressures.

The US Bureau of Economic Analysis reported on Friday that the headline Personal Consumption Expenditures (PCE) Price Index increased by 2.5% year-over-year in July, matching the previous reading of 2.5% but falling short of the estimated 2.6%. Meanwhile, the core PCE, which excludes volatile food and energy prices, rose by 2.6% year-over-year in July, consistent with the prior figure of 2.6% but slightly below the consensus forecast of 2.7%.

Tokyo's Consumer Price Index (CPI) increased to 2.6% year-on-year in August, up from 2.2% in July. Core CPI also rose to 1.6% YoY in August, compared to the previous 1.5%. Additionally, Japan’s Unemployment Rate unexpectedly climbed to 2.7% in July, up from both the market estimate and June's 2.5%, marking the highest jobless rate since August 2023.

Federal Reserve Bank of Atlanta President Raphael Bostic, a prominent hawk on the FOMC, indicated last week that it might be "time to move" on rate cuts due to further cooling inflation and a higher-than-expected unemployment rate. FXStreet’s FedTracker, which gauges the tone of Fed officials’ speeches on a dovish-to-hawkish scale from 0 to 10 using a custom AI model, rated Bostic’s words as neutral with a score of 5.6.

The US Gross Domestic Product (GDP) grew at an annualized rate of 3.0% in the second quarter, exceeding both the expected and previous growth rate of 2.8%. Additionally, Initial Jobless Claims showed that the number of people filing for unemployment benefits fell to 231,000 for the week ending August 23, down from the previous 233,000 and slightly below the expected 232,000.

Japan’s Finance Minister Shunichi Suzuki stated last week that foreign exchange rates are influenced by a variety of factors, including monetary policies, interest rate differentials, geopolitical risks, and market sentiment. Suzuki added that it is difficult to predict how these factors will impact FX rates.

Technical Analysis: USD/JPY reacts off 21-day EMA, further downward pressure expected

USD/JPY trades around 145.40 on Wednesday. An analysis of the daily chart shows that the nine-day Exponential Moving Average (EMA) is below the 21-day EMA, signaling a bearish trend in the market. Additionally, the 14-day Relative Strength Index (RSI) remains below 50, further confirming that the bearish trend is still in place.

For the USD/JPY pair, support may be found around the seven-month low of 141.69, recorded on August 5, with the next key support level near 140.25.

On the upside, the pair might first encounter resistance at the nine-day EMA around 145.63, followed by the 21-day EMA at 146.73. A break above this level could pave the way for a move toward the psychological barrier of 150.00, with further resistance at the 154.50 level, which has transitioned from support to resistance.

Source: FXSTREET

Australia’s economic weakness persisted in the three months through June as consumers hunkered down in the face of elevated borrowing costs and stubbornly sticky inflation.

Gross domestic product advanced 0.2 per cent from the prior quarter, propped up by government spending and matching economists’ estimate, Australian Bureau of Statistics data showed Sept 4. From a year earlier, the economy grew 1 per cent from an upwardly revised 1.3 per cent and forecast of 0.9 per cent.

“Excluding the Covid-19 pandemic period, annual financial year economic growth was the lowest since 1991-92 – the year that included the gradual recovery from the 1991 recession,” Ms Katherine Keenan, ABS head of National Accounts, said in a statement. The economy expanded 1.5 per cent during the financial year ended June 30.

The Australian dollar held onto its declines, as did the interest-rate sensitive three-year government bond yield.

With annual growth slowing from a decade average of 2.4 per cent, the data are likely to ease concerns about demand-driven inflation pressures in the economy. That suggests the RBA can remain in a holding pattern for a while in order to assess the economy, with the cash rate currently at a 12-year high of 4.35 per cent.

The RBA reckons the second quarter was the nadir of the slowdown, predicting the annual expansion will accelerate to 1.7 per cent by year’s end before picking up to 2.5 per cent in late 2025. 

Bloomberg Economics expects growth will remain subdued in 2024, as the cumulative impact of higher rates damps household demand and housing-related activity.

Sept 4’s data showed the household savings ratio held at 0.6, having slipped from a peak of 24.1 per cent in June 2020 and underscoring the limited financial cushion available to Australians. 

Household spending slid 0.2 per cent in the second quarter, detracting 0.1 percentage point from GDP growth. “The strongest detractor from growth was transport services, particularly reduced air travel,” the ABS’s Keenan said. “This was the first fall for this series since the September 2021 quarter.”

Government spending climbed 1.4 per cent, led by programs for health services and adding 0.3 point to GDP growth.

The figures follow the RBA’s decision to leave rates unchanged in August, with Governor Michele Bullock saying it’s premature to think about rate cuts yet. Her deputy Andrew Hauser last week reinforced that view, saying inflation was still a “bit stickier” in Australia than in countries like the US.

Most economists believe the RBA has concluded its tightening campaign, with a cut seen in February 2025. By comparison, the Federal Reserve is likely to cut rates this month with Europe, New Zealand and the UK already on an easing path.

“Today’s National Accounts confirm the Australian economy barely grew in the June quarter,” Treasurer Jim Chalmers said in a statement. “Really soft growth reflects the impacts of global economic uncertainty, higher interest rates and persistent but moderating inflation.”

Sept 4’s GDP report also showed:

Services exports rose 5.6 per cent in the second quarter following falls in the previous two periods. This was led by education-related travel services particularly from a rise in average spending

Per capita GDP fell for a sixth consecutive quarter, sliding 0.4 per cent

Gross disposable income rose 0.9 per cent, outpacing a rise in nominal household spending of 0.7 per cent, the ABS said

Higher household earnings were partly offset by an increase in income tax payable and mortgage payments

Source: Straitstimes

Crude oil analysis:

Forex Today: The prospects of a US soft landing remain challenged by data

Meaningful European data remains limited in the front half of the trading week, and Thursday will see Fiber traders with their hands full thanks to an update to pan-European Retail Sales in July followed by US preview labor figures before Friday’s NFP jobs dump.

Pan-EU Retail Sales for the year ended in July are expected to recovery slightly, forecast to print at 0.1% YoY compared to the previous period’s -0.3% decline. European Gross Domestic Product (GDP) figures are also slated for Friday, and growth is broadly expected to hold steady at previous figures in the second quarter.

ISM’s US Manufacturing PMI for August came in below expectations, printing at 47.2 and missing the median market forecast of 47.5. Despite a soft rebound from July’s multi-month low of 46.8 failed to galvanize markets, giving already flighty investors a perfect excuse to pull back from a recent lopsided tilt into bullish expectations.

Friday's US Nonfarm Payrolls (NFP) report looms large. It represents the last round of key US labor data before the Federal Reserve (Fed) delivers its latest rate call on September 18. Friday's NFP print is widely expected to set the tone for market expectations regarding the depth of a Fed rate cut, with investors fully priced in on the start of a new rate-cutting cycle this month.

EUR/USD price forecast

Fiber has slumped back into near-term technical barriers, but bidders continue to come out of the woodwork in an effort to keep bids on-balance even if they can’t quite pull out a bullish recovery.. EUR/USD popped into a 13-month high just above 1.1200 early last week, and a near-term pullback in Greenback flows sees bids scrambling to hold onto bullish chart paper.

The pair is still trading well north of the 200-day Exponential Moving Average (EMA) at 1.0845. Despite holding deep in the bull country, EUR/USD is still facing a steepening bearish pullback as shorts congregate targets just above the 50-day EMA at 1.0956.

Source: FXSTREET