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THE GIST
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May 15, 2024
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September 1, 2023
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July 4, 2025 DOWNLOAD
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June 30, 2025 DOWNLOAD
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Archives: Reuters Articles

Dollar dips as inflation data points to lower core PCE

Dollar dips as inflation data points to lower core PCE

NEW YORK – The dollar slipped on Thursday after components of January’s producer price report pointed to lower inflation, and fell further after the White House said that reciprocal tariffs on other nations would not be implemented immediately.

Producer price data on Thursday indicated that core PCE inflation, the Federal Reserve’s preferred measure, is likely to be lower than previously expected for January when it is released later this month.

It came despite producer prices rising more than economists expected.

“There were some subcomponents in there that show that PCE might not be as hot as CPI suggested,” said Noel Dixon, global macro strategist at State Street Global Markets.

The producer price report came after Wednesday’s Consumer Price Index for January was much higher than expected, leading traders to price in fewer rate cuts this year.

Futures traders are now pricing in around 33 basis points of cuts by December, up from 29 basis points before Thursday’s data, but down from 37 basis points before the CPI data was released on Wednesday.

The Personal Consumption Expenditures Price Index is due on February 28. Economists at Morgan Stanley revised their core PCE inflation expectation for January to 0.3%, from 0.4%, after Thursday’s data.

The dollar index was last down 0.61% on the day at 107.25, the lowest since January 27. The euro rose 0.58% to USD 1.0442 and earlier reached USD 1.0446, the highest since January 30.

The Japanese yen strengthened 1.05% against the greenback to 152.8 per dollar.

The greenback briefly pared losses before falling to lower levels after US President Donald Trump said he would levy reciprocal tariffs on every country that charges duties on US imports.

The tariffs were not going into effect on Thursday but could begin to be imposed
within weeks as Trump’s trade and economic team study bilateral tariff and trade relationships, a White House official told reporters.

The announcement appeared designed at least in part to trigger talks with other countries. The official said Trump would be more than happy to lower tariffs if other nations lowered theirs.

“The message from Trump seems to be that – we’re going to get you, but not today. And the market seems to take comfort from that,” said Steve Englander, Head, Global G10 FX Research and North America Macro Strategy at Standard Chartered Bank’s NY Branch.

The euro and other European currencies including the Swiss franc, Swedish krona, and Norwegian krone were also boosted on optimism that Russia and Ukraine could reach a peace deal.

“It’s telling you that geopolitics in that part of the world is calming down a little bit,” said Englander.

Trump discussed the war in Ukraine on Wednesday in phone calls with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy, the new US president’s first big step towards diplomacy over a war he has promised to end.

Meanwhile, the US dollar remains attractive with the US economy still growing well above trend, said State Street’s Dixon, adding that US tariffs and immigration restrictions in the US are also likely to add to inflation, while tariffs could further dent growth in the eurozone.

“The overarching trend for the dollar is higher,” Dixon said.

Sterling gained after data showed that Britain’s economy unexpectedly grew by 0.1% in the final quarter of last year. It was last up 0.8% at USD 1.2541.

In cryptocurrencies, bitcoin fell 2.01% to USD 95,716.98.

(Reporting by Karen Brettell; Editing by Ros Russell and Andrea Ricci)

 

Wall Street rallies as hot PPI looks cooler under surface

Wall Street rallies as hot PPI looks cooler under surface

A rally in US stocks and bonds looked counterintuitive after PPI headlines appeared to be the second hot inflation read this week, but, under the hood, key components looked more like they were moving the direction the Fed and Wall Street want.

But even while investors in New York markets lifted the S&P 500 a percent and the Nasdaq more than that on Thursday, continued gains on Asia bourses Friday are hardly assured, given the challenge of navigating the twists and turns from President Donald Trump as he pushes for a peace deal in Ukraine while setting up for a global trade war.

The prospect of Russia-Ukraine peace talks helped foster the risk-on mood in stocks, while the inflation news with potential dovish implications for Fed officials reversed Wednesday’s bond slump and the yield on the 10-year Treasury note fell almost 10 basis points to around 4.53%.

The bigger-than-forecast 0.4% rise in January’s Producer Price Index followed Wednesday’s news that consumer prices accelerated by the most in nearly 1-1/2 years in January. But some details suggested a more moderate increase in January in the PCE price index that is closely tracked by the US central bank for its 2% target.

For instance, physician’s office and hospital prices were either broadly unchanged or rose just slightly. Healthcare, with a nearly 20% weighting in the core PCE, declined 0.06%. Portfolio management prices, another important item on core PCE, posted a modest 0.4% increase.

Following the PPI data, US rate futures priced in 31 bps of easing this year, compared with 27 bps late on Wednesday, according to LSEG calculations. The next rate reduction is expected either at the October or December meeting.

Russia said on Thursday that Ukraine would “of course” be involved in talks to end the war, but there would be a separate US-Russian strand to the negotiations. Ukraine and its European allies meanwhile demanded that they be included in any peace negotiations.

The markets took in stride Trump’s oft-promised roadmap for charging reciprocal tariffs on every country that puts duties on US imports, his latest trade salvo directed at American friends and foes.

The dollar pared losses a tad on the tariff headlines and against the yen it was trading at 152.97 yen late in the day, down about 0.9%. The stronger yen in recent weeks has been a negative for the Nikkei but weakness in Asia Thursday was cited as a reason for the index’s 1.28% gain.

Meanwhile, Indian Prime Minister Narendra Modi will meet Trump on Thursday, hoping concessions on tariffs, fresh business deals and the prospect of cooperation on China will win the US president’s favor.

Here are key developments that could provide more direction to markets on Friday:

– South Korea unemployment (Jan)

– Malaysia GDP (Q4)

– US Retail Sales (Jan)

(Editing by Diane Craft)

 

Ukraine ceasefire hopes soften US inflation blow

Ukraine ceasefire hopes soften US inflation blow

Investors banking on the recent decline in US bond yields and the dollar underpinning a rally across risk assets got a stark reminder in the shape of punchy US inflation on Wednesday that interest rates won’t be coming down any time soon.

In fact, they got a few reminders – Fed Chair Jerome Powell repeated his view that monetary policy must remain restrictive for now, and House Republicans unveiled a fiscal plan that would cut taxes by about USD 4.5 trillion over a decade and raise the federal debt ceiling by USD 4 trillion.

Faced with sticky inflation, fiscal largesse, and Powell’s confidence in the US economy, rates markets are now only pricing in one Fed rate cut this year, which would leave the Fed funds rate above 4.00%.

The 10-year yield rose 10 basis points, the yield curve steepened, the dollar jumped, and stocks fell.

But risk assets have been resilient this year, not only in the US where Wall Street and corporate bonds are hugging record highs, but globally. Many emerging market stocks and currencies are up year-to-date, also quite impressive considering the dark cloud of US tariffs hanging over them.

This resilience got a boost on Wednesday after US President Donald Trump spoke with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy about starting negotiations “immediately” to end the war in Ukraine.

That was enough to take the wind out of the dollar’s sails, slam oil down 2.5%, cut Wall Street’s losses, and push Asian equity futures into the green.

While many money managers will have factored a potential Russia-Ukraine ceasefire into their investment allocations this year, it’s unlikely it has been fully priced across markets. All else equal, further progress towards peace should support risk appetite, and keep a lid on oil and the dollar.

In Asia on Thursday, the main events will be an interest rate decision from the central bank of the Philippines and the latest wholesale inflation figures from Japan.

The Bangko Sentral ng Pilipinas (BSP) is widely expected to cut its key policy rate by a quarter-point to 5.50%. Inflation appears to be under control, in the central bank’s 2-4% target range since October, but growth is slowing.

The Philippine peso has been among the weaker emerging market currencies, and is down slightly against the dollar year-to-date.

The yen, meanwhile, had its worst day this year against the dollar on Wednesday but could rebound on Thursday if Japanese wholesale inflation figures come in on the strong side.

Economists are expecting a rise in the annual rate to 4.0% in January. That would be the highest since June 2023 and strengthen the argument for further rate hikes.

Here are key developments that could provide more direction to Asian markets on Thursday:

– Philippines central bank policy decision

– Japan wholesale inflation (January)

– Thai finance minister Pichai Chunhavajira speaks

(By Jamie McGeever, editing by Deepa Babington)

 

S&P 500 ends down as hot US inflation data hints at fewer rate cuts

S&P 500 ends down as hot US inflation data hints at fewer rate cuts

The S&P 500 ended down on Wednesday after a hotter-than-expected US inflation reading added to worries that the Federal Reserve would not cut interest rates anytime soon, while CVS Health and Gilead Sciences rallied after upbeat quarterly reports.

Nvidia and Amazon dipped more than 1%, with the two AI computing heavyweights weighing on the S&P 500.

US consumer prices increased in January by the most in nearly a year and a half, reinforcing the Fed’s message that it was in no rush to resume cutting rates.

The surge in prices offered a cautionary note to President Donald Trump’s push for tariffs on imported goods, which economists have panned as inflationary.

Interest rate futures now suggest traders see about a 70% chance the Fed will reduce rates by another 25 basis points by the end of 2025, down from about an 80% chance on Tuesday, according to CME Fedwatch.

“The market is digesting that the Fed may not cut at all. That’s why the stock market is down, said Jake Dollarhide, CEO of Longbow Asset Management in Tulsa, Oklahoma.

The S&P 500 declined 0.27% to end the session at 6,051.97 points.

The Nasdaq gained 0.03% to 19,649.95 points, while the Dow Jones Industrial Average declined 0.50% to 44,368.56 points.

Of the 11 S&P 500 sector indexes, nine declined, led lower by energy, down 2.69%, followed by a 0.91% loss in real estate.

CVS Health surged 15% after the healthcare conglomerate beat fourth-quarter profit estimates, hinting at improved performance under new CEO David Joyner.

Gilead Sciences jumped 7.5% after the biotech company forecast 2025 earnings above analyst estimates.

Fed Chair Jerome Powell also began his second day of testimony before Congress on Wednesday. On Tuesday, he reiterated to the Senate Banking Committee that the US central bank was in no rush to cut rates again.

January’s reading is the last inflation reading before any direct impact from Trump’s tariff measures, which went into effect this month.

Trump’s trade advisers are finalizing plans for reciprocal tariffs on every country that charges duties on US imports.

The Cboe Volatility Index, known as Wall Street’s “fear gauge,” jumped to its highest in a week.

Treasury yields shot up after the inflation data, with the one on the 10-year note hitting its highest in over two weeks.

Lyft dropped 8% after the ride-hailing company forecast current-quarter gross bookings below estimates.

In extended trade, Robinhood Markets surged 5% after the stock trading platform reported quarterly revenue above analysts’ expectations, fueled by frenetic trading activity following Trump’s presidential election victory in November.

In Wednesday’s session, declining stocks outnumbered rising ones within the S&P 500 by a 2.2-to-one ratio.

The S&P 500 posted 24 new highs and 24 new lows; the Nasdaq recorded 75 new highs and 210 new lows.

Volume on US exchanges was relatively light, with 14.8 billion shares traded, compared to an average of 14.9 billion shares over the previous 20 sessions.

(Reporting by Shashwat Chauhan and Sukriti Gupta in Bengaluru; Editing by Maju Samuel and David Gregorio)

 

Gold steadies as trade war concerns lend support

Gold steadies as trade war concerns lend support

Gold prices steadied on Wednesday, buoyed by safe-haven demand amid fears of a global trade war spurred by US President Donald Trump’s new tariffs as the market digested hotter-than-expected US inflation data.

Spot gold was steady at USD 2,895.30 per ounce as of 2:39 p.m. ET (1939 GMT). US gold futures settled 0.1% lower at USD 2,928.70.

Prices dropped more than 1% after data showed the US consumer price index jumped 0.5% last month, more than expected, reinforcing the Federal Reserve’s message that it was in no rush to resume cutting interest rates amid growing uncertainty over the economy.

“With today’s CPI data coming in hotter-than-expected, that has put weight on the gold market. Obviously, at this point, any expectation that the market would have had of any type of rate cut later this year has now been put down,” said David Meger, director of metals trading at High Ridge Futures.

Higher interest rates tend to weigh on bullion, increasing its opportunity cost as it yields no interest.

While, “higher interest rate storyline provided a little bit of pressure on gold, the trend remains positive, and trade concerns continue to drive the market,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.

After raising steel and aluminum tariffs to 25% earlier this week, US President Donald Trump’s advisers are now finalizing plans for reciprocal tariffs.

Gold prices have marched into uncharted territory as bulls latch on to economic uncertainty created by US import tariff plans, but behind the prize of hitting a record USD 3,000 per ounce, some flags of a bear case are also being planted.

Despite a minor sell-off, even a drop of a few hundred dollars from near USD 3,000 isn’t catastrophic, said Daniel Pavilonis, senior market strategist at RJO Futures, adding that with concerns about inflation, debt and geopolitics, people are still driven to invest in gold.

Spot silver rose 1.1% to USD 32.17 per ounce and palladium fell 0.2% to USD 973.74, while platinum added 0.6% to USD 989.43.

(Reporting by Anmol Choubey and Swati Verma in Bengaluru; Editing by Shailesh Kuber)

 

Oil sinks 2% after Trump calls Putin, Zelenskiy to discuss end to war in Ukraine

Oil sinks 2% after Trump calls Putin, Zelenskiy to discuss end to war in Ukraine

HOUSTON – Oil prices settled down more than 2% on Wednesday after US President Donald Trump took the first big step toward diplomacy over the war in Ukraine he has promised to end, a war that has supported oil prices on concerns about global supplies.

Brent futures settled down USD 1.82, or 2.36%, at USD 75.18 a barrel. US West Texas Intermediate (WTI) crude settled down USD 1.95, or 2.66%, to USD 71.37.

US crude futures fell more than USD 2 at their session low. The declines follow three days of gains, during which Brent climbed 3.6% and WTI rose 3.7%.

US President Donald Trump discussed the war in Ukraine in phone calls with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy.

“Trump doing peace talks, I think that has taken some of the risk premium out of oil prices right now,” said Phil Flynn, senior analyst with Price Futures Group.

In a post on his social media platform, Trump said he and Putin had “agreed to have our respective teams start negotiations immediately, and we will begin by calling President Zelenskiy, of Ukraine, to inform him of the conversation, something which I will be doing right now.”

Zelenskiy’s office said Trump and Zelenskiy had spoken by phone for about an hour.

Investors also tried to gauge the Federal Reserve’s next moves on cutting interest rates following comments on Tuesday by Fed Chair Jerome Powell and after data on Wednesday showed US consumer prices increased more than expected in January.

“The combination of higher inflation and the possibility of peace (in Ukraine) is causing a bit of a sell-off in the market at the moment,” said Price Futures Group’s Flynn.

Powell said the economy is in a good place and the Fed is not rushing to cut rates further, but is prepared to do so if inflation drops or the job market weakens.

Consumer price data released by the US Labor Department showed surprisingly strong US inflation in January, stoking fears that a heating economy and looming tariffs could undercut hopes for rate cuts. Higher rates can slow economic activity and dampen demand for oil.

“The inflation numbers came in hot, reducing the chances of the Fed cutting rates from September to December,” said Price Futures Group’s Flynn.

US crude oil stocks posted a larger-than-expected build last week, the Energy Information Administration (EIA) said on Wednesday. Gasoline inventories meanwhile posted a surprise draw while distillate stocks posted a surprise build. Elsewhere, Russia may be forced to throttle back its oil output in the coming months as US sanctions hamper its access to tankers to sail to Asia and Ukrainian drone attacks hobble its refineries.

The Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report that global oil demand will rise by 1.45 million barrels per day (bpd) in 2025 and by 1.43 million bpd in 2026. Both forecasts were unchanged from last month.

The EIA increased its estimate for US crude production while leaving its demand forecast unchanged. It now expects US crude oil output to average 13.59 million bpd in 2025, up from its previous estimate of 13.55 million bpd.

The Trump administration named Kathleen Sgamma, a vocal oil and gas advocate for Western states, to head up the Interior Department’s Bureau of Land Management, which manages the use of the country’s nearly 250 million acres of public lands.

(Reporting by Georgina McCartney in Houston, Colleen Howe, Trixie Yap, Arunima Kumar, and Ahmad Ghaddar; Editing by Chizu Nomiyama, David Goodman, Emelia Sithole-Matarise, and David Gregorio)

 

Gold falls as traders hunker down for US inflation print

Gold falls as traders hunker down for US inflation print

Gold eased on Wednesday, after hitting an all-time high in the previous session on global trade war fears triggered by US President Donald Trump’s new tariffs, as the market’s focus shifted to a key US inflation report.

FUNDAMENTALS

* Spot gold fell 0.1% at USD 2,895.23 per ounce, as of 0033 GMT, after climbing a peak of USD 2,942.70 on Tuesday.

* US gold futures eased 0.3% to USD 2,923.40.

* Mexico, Canada, and the European Union on Tuesday condemned Trump’s decision to impose tariffs on all steel and aluminum imports next month, which fanned fears of a trade war as investors braced for yet more trade duty announcements.

* US Federal Reserve Chair Jerome Powell said the economy is in a good place and the Fed isn’t rushing to cut interest rates further, but is prepared to do it if inflation drops or the job market weakens.

* Bullion is considered a hedge against inflation, but higher interest rates dampen the non-yielding asset’s appeal.

* Investors now await US Consumer Price Index (CPI) data due at 1330 GMT and Producer Price Index (PPI) data on Thursday.

* Federal Reserve Chair Jerome Powell is also due to testify before Congress later in the day.

* Elsewhere, gold leasing rates in India have doubled within a month to a record high, following the overseas market, where rates jumped due to a supply crunch as global banks divert the precious metal to the United States, industry officials told Reuters.

* Spot silver fell 0.1% to USD 31.78 per ounce, while platinum gained 0.1% to USD 984.50 and palladium firmed 0.3% to USD 978.77.

DATA/EVENTS (GMT)

1330 US Core CPI MM, SA, Core CPI YY, NSA Jan

1330 US CPI MM, SA, CPI YY, NSA Jan

1330 US CPI Wage Earner Jan

1530 US EIA-Nat Gas Chg Bcf, Nat Gas-EIA Implied Flow 7 Feb, w/e

(Reporting by Anushree Mukherjee in Bengaluru; Editing by Rashmi Aich)

 

Mounting tariff-linked inflation jitters push US Treasury yield forecasts higher

Mounting tariff-linked inflation jitters push US Treasury yield forecasts higher

BENGALURU – Bond strategists are rethinking long-held forecasts for declining US Treasury yields on the basis that tariff-linked inflation threats could further delay Federal Reserve rate cuts, a Reuters survey found.

Many of those yield upgrades were based on investors demanding higher ‘term premium’ – compensation for holding debt over time – owing to President Donald Trump’s tariff and tax-cut plans, which are complicating the Fed’s efforts to bring inflation down.

Continued US economic outperformance and the Fed’s insistence that it is “not in a hurry” to lower rates further have pushed interest rate futures to completely price in just one more rate reduction this year.

US Treasury Secretary Scott Bessent suggested in an interview last week that the White House was focused on keeping 10-year Treasury yields low rather than asking the Fed to lower policy rates.

Vague statements by Trump suggesting “very fraudulent” Treasury debt payment records have rattled bond market participants in recent days, although the remarks have done little to prices and yields so far.

Three-quarters of poll respondents, 16 of 21, in a February 6-11 Reuters survey said the greater risk to their three-month forecast was yields, which move inversely to prices, overshooting rather than dropping.

For many, Trump’s erratic policy moves — especially on tariffs — add to this risk.

“If we didn’t have all these policy changes, I would expect disinflation, a normalization of policy rates and inflation falling back towards 2%. But I have to take into account the changes that could upend that expectation,” said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research.

“That’s why we’ve shifted our views, basically saying ‘okay, the game is on. We have inflationary policies, we’re going to get inflation’. We see short rates staying pretty steady, but 10-year yields potentially moving back up to the 5% region.”

Jones was in line with a near-60% majority of economists in a separate Reuters survey who agreed tariff-linked US inflation risks have gone up recently and a two-thirds majority of bond analysts from a January survey who said the yield surpassing 5% this year was “very likely” or “likely”.

Median forecasts from strategists in the poll were for the benchmark 10-year yield US10YT=RR to hold steady at 4.53% in three months and trade at 4.50% in six months, higher than the median 4.40% and 4.35%, respectively, from last month’s poll.

Over half revised up their January forecasts, which were themselves broad upward adjustments from December.

“Our outlook is the Fed stays on hold at least until the June meeting – if not longer – and Treasury yields then stay in a range. But there’s more risk for yields to move up than down from here especially at the long end because of tariffs and fiscal policy,” Jones added.

A majority of forecasters in the survey predicted the yield would equal or surge past current levels at some point in their three-, six- or 12-month forecasts — a radical shift from the landslide majority who almost exclusively saw yields declining in earlier surveys.

“Since the summer of 2022, the consensus has almost always forecast a recession and naturally, for rates to decline, since they have the impression current interest rates levels are way too high. But the US has been growing above-trend since then, and those forecasts have been very wrong,” said Lars Mouland, chief rates strategist at Nordea.

“Why should the Fed cut rates? If they cut too much now, they risk firing up an economy already running at a pretty good speed.”

(Reporting by Sarupya Ganguly; Analysis by Jaiganesh Mahesh; Polling by Shaloo Shrivastava and Renusri K; Editing by Ross Finley and Christina Fincher)

 

Dollar falls as tariff concerns ease, Fed’s Powell stays patient on rate cuts

Dollar falls as tariff concerns ease, Fed’s Powell stays patient on rate cuts

The US dollar fell on Tuesday as Federal Reserve Chair Jerome Powell said the US central bank was in no rush to cut its short-term interest rate again and as traders waited on more concrete information regarding potential trade tariffs by US President Donald Trump.

Powell said in testimony before the Senate Banking, Housing and Urban Affairs Committee that the view on rates reflected the US economy being “strong overall,” with low unemployment and inflation that remains above the Fed’s 2% target. The comments were largely expected by traders.

He also told lawmakers the argument for free trade still makes sense but added that it was not the role of the Fed to comment on tariff or trade policy but to react to how it impacts the economy.

“He’s trying to be very, very, very conservative in his commentary and not spook anybody,” said Helen Given, FX trader at Monex USA in Washington.

Traders are becoming more immune to news around potential tariffs, which have unnerved investors on concerns about how they may impact inflation and growth.

“We’ve seen a lot of volatility come off of tariff headlines in the last two weeks,” said Given. “What we’re seeing now is that those headlines and those announcements are not necessarily an indication that these tariffs are actually going to be levied, at least not at the time that we think that they might be. So, everyone is just in a wait-and-see mode.”

Futures priced in 36 basis points worth of Fed rate cuts by the year-end, little changed from before Powell’s comments, which implies one 25-bp cut and only a partial chance of a second.

Powell will also testify before the House Financial Services Committee on Wednesday.

Consumer price data for January due on Wednesday is this week’s main US economic release and is expected to show inflation remained sticky during the month.

The US dollar index was last down 0.37% on the day at 107.96.

Tariffs are likely to remain a key focus for traders on any signs that trade tensions are intensifying.

“The threat of more US tariffs remains, also against the European Union. Retaliation could even lead to a tail risk scenario of a global trade war,” said Athanasios Vamvakidis, global head of forex research at BofA.

“Even if the worst is avoided, we are concerned that prolonged uncertainty will have negative implications for the global economy,” he added.

Trump on Monday said he would announce plans to impose reciprocal tariffs on other countries over the next two days, doubling down on comments he made on Sunday.

On Sunday Trump said he would introduce new 25% tariffs on all steel and aluminum imports into the US, on top of existing metals duties.

The European Union said it would respond with “firm and proportionate countermeasures”.

The euro was last up 0.49% at USD 1.0357.

The Canadian dollar strengthened 0.14% versus the greenback to C$ 1.43 per dollar, bouncing back from earlier losses.

Canada, Brazil, Mexico, South Korea, and Vietnam are the biggest sellers of steel into the US, according to American Iron and Steel Institute data, while Canada is the dominant supplier of imported aluminum.

The Japanese yen weakened 0.3% against the greenback to 152.45 per dollar. It hit 150.93 on Friday, its highest since December 10.

The Australian dollar rose 0.29% versus the US currency to USD 0.6293.

Australian Prime Minister Anthony Albanese said on Tuesday Trump has agreed to consider exempting Australia from his steel and aluminum tariffs, in what Albanese called a constructive phone call with the US president.

In cryptocurrencies, bitcoin fell 2.26% to USD 95,204.76.

(Reporting by Karen Brettell; Additional reporting by Stefano Rebaudo; Editing by Bernadette Baum, David Evans, Christina Fincher, and Sandra Maler)

 

Oil prices climb to 2-week high on supply worries, US tariffs check gains

Oil prices climb to 2-week high on supply worries, US tariffs check gains

NEW YORK – Oil prices edged up to a two-week high on Tuesday as sanctions raised concerns about Russian and Iranian oil supplies and on rising Middle East tensions, outweighing worries that trade tariffs would boost inflation and dampen global economic growth.

Brent futures rose USD 1.13, or 1.5%, to settle at USD 77.00 a barrel, while US West Texas Intermediate (WTI) crude rose USD 1.00, or 1.4%, to settle at USD 73.32.

That put both crude benchmarks up for a third day and at their highest closes since Jan. 28.

“With the US bearing down on Iranian exports and sanctions still biting into Russian flows, Asian crude grades remain firm and underpin the rally from yesterday,” PVM oil analyst John Evans said.

US sanctions targeting tankers, producers and insurers have significantly disrupted shipments of Russian oil to leading importers China and India.

Also supporting crude prices were US sanctions on networks shipping Iranian oil to China after US President Donald Trump restored his “maximum pressure” on Iranian oil exports last week.

Adding to supply jitters is the possibility of renewed fighting in the oil-rich Middle East.

Israeli Prime Minister Benjamin Netanyahu said that if Hamas did not release Israeli hostages by noon on Saturday a fragile ceasefire in Gaza would end. Those comments followed a demand by Trump on Monday for Hamas to release all hostages by midday Saturday or he would propose cancelling the Israel-Hamas ceasefire and “let hell break out.”

Trump also said he might withhold aid to Jordan and Egypt if they do not take Palestinian refugees being relocated from Gaza. Trump is meeting with Jordan’s King Abdullah on Tuesday.

TARIFFS WEIGH ON PRICES

Oil price gains were kept in check by fears that Trump’s latest tariffs could dampen global growth and energy demand.

On Monday, Trump raised tariffs on steel and aluminum imports to the United States to 25% “without exceptions or exemptions.”

Mexico, Canada and the European Union condemned Trump’s decision to impose tariffs on all steel and aluminum imports next month, a move that has fanned fears of a trade war.

“Tariffs and counter-tariffs have the potential to weigh on the oil-intensive part of the global economy in particular, creating uncertainty over demand,” Morgan Stanley said in a note.

US Federal Reserve Chair Jerome Powell told lawmakers that free trade still makes sense, though it was not the central bank’s role to comment on tariff or trade policy but to react to how it impacts the economy.

A majority of economists in a Reuters poll forecast the Fed would wait until the next quarter before cutting interest rates again.

Tariffs can cause prices and inflation to rise. The Fed uses higher interest rates to combat rising prices. So long as the Fed and other central banks keep interest rates higher for longer, borrowing costs will remain elevated, which can slow economic growth and ultimately demand for oil.

SUPPLY, DEMAND AND INVENTORIES

World oil supply and demand will both rise to record highs in 2025 and 2026, the US Energy Information Administration (EIA) said in its Short-Term Energy Outlook (STEO).

EIA projected total world petroleum production would rise to 104.6 million barrels per day (bpd) in 2025 and 106.2 million bpd in 2026 from a record 102.8 million bpd in 2024. It also projected total world petroleum consumption would rise to 104.1 million bpd in 2025 and 105.2 million bpd in 2026 from a record 102.8 million bpd in 2024.

The market is waiting for the American Petroleum Institute trade group to release US oil inventory data on Tuesday, with the EIA to report official data on Wednesday.

Analysts forecast energy firms added about 3.0 million barrels of oil to US stockpiles during the week ended Feb. 7.

If correct, that would be the first time energy firms added oil into storage for three weeks in a row since mid-November. That compares with an increase of 12.0 million barrels during the same week last year and an average build of 4.9 million barrels over the past five years (2020-2024).

(Reporting by Scott DiSavino in New York and Ahmad Ghaddar in London; Additional reporting by Enes Tunagur in London, and Siyi Liu in Singapore; Editing by Angus MacSwan, David Goodman, Will Dunham, and Nia Williams)

 

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