Commodities fall while U.S. Producer prices beat expectations

Exclusive Capital Research Team

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Market Brief, Wednesday, 12th of August 2020

U.S. producer prices rebounded more than expected increasing 0.6% in July after falling 0.2% in June. The overall trend in producer inflation however remained subdued amid signs the economy’s recovery from the COVID-19 recession was faltering.

Market moves for the dollar continue to rely on talks around the US fiscal stimulus package. While the market awaits a breakthrough in negotiations, recent news that President Trump is considering a capital gains tax cut to revive the jobs market may keep investor sentiment more upbeat.

The German ZEW survey was yesterday’s main event for the Eurozone showing an improvement in economic sentiment for August, improving from 59.3 last month to 71.5. The Euro however still closed slightly negative yesterday against the dollar amongst renewed optimism for US economic growth despite the coronavirus pandemic continuing to limit economic activity. Today the pair awaits EU Industrial Production data for June, and US CPI figures for July.

On Tuesday, Crude oil: WTI extended its rally and touched a daily high of $42.91 but struggled to preserve its bullish momentum. WTI price remained virtually unchanged on the day, near $42 even after President Vladimir Putin announced that they have developed a coronavirus vaccine and that the US Energy Information Administration raised its forecast for 2020 world oil demand growth by 40,000 barrels per day. Today’s API data could well determine any short to midterm price moves.

And finally, Gold plunged, with spot down to $1,909.90 per troy ounce, shedding roughly $120.00 in the day. However, Gold could potentially surge again if Democrats and Republicans agree and proceed with a fiscal stimulus package. Ultimately the yellow metal needs more funds – either from a monetary stimulus or fiscal stimulus deal.

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