• US demand weakens 
• Global demand concerns resurface as China’s economy slows down 

Global oil prices fell in American trade on Wednesday, moving away from four-week highs on profit-taking, after data showed a surprise increase in US crude stocks. 

Prices are also pressured by concerns about weakening global demand after latest data from OPEC and China.

Prices

US crude prices fell 1.1% today to $77.72 a barrel, with a session-high at $79.077. 

Brent fell 0.9% to $80.24, with a session-high at $81.38.

On Tuesday, US crude lost 1.25%, the first loss in five sessions, moving away from four-week highs at $80.13.

Brent fell 1.3%, the first loss in five sessions as well, after marking July 26 highs on the previous day at $82.35. 

US Stocks

The Energy Information Administration reported a buildup of 1.4 million barrels in US crude stocks last week, while analysts expected a drawdown of 1.9 million barrels.

It’s the first inventory build in seven weeks, and a sign of weakening demand in the US.

Global Demand

OPEC, in its latest monthly report, reduced its estimates for global demand growth by 135 thousand bpd this year, due to weaker demand from China.

The International Energy Agency also said that global demand growth in the second quarter was the slowest since late 2022, at only 720 thousand bpd. 

The IEA nonetheless maintained its estimates for global demand growth at 970 thousand bpd in 2024. 

• UK services inflation dips in July to two-year lows
• Rising prospects of BOE rate cut in September 

Sterling fell in European trade on Wednesday against a basket of main rivals, marking the first loss in six days and giving up two-week highs on profit-taking, following weak UK inflation data. 

The data showed inflationary pressures on the Bank of England are receding, which boosted the prospects of a 0.25%  BOE rate cut in September.

The Price 

The GBP/USD fell 0.4% today to $1.2817, with a session-high at $1.2869. 

The pair rose 0.8% on Tuesday, the fifth profit in a row, marking two-week highs at $1.2873 after weak US producer prices data

UK Inflation

Official UK data showed consumer prices rose 2.2% in July, below estimates of 2.3%, and up from 2% in June.

Core prices, excluding food and energy, rose 3.3%, below estimates of 3.4%, and down from 3.5% in the previous reading. 

The data bolsters the odds of a Bank of England interest rate cut in September as inflationary pressures recede. 

UK Rates

Following the data, the odds of a BOE rate cut in September rose from 36% to 47%, with markets expecting a total of 50 basis points of rate cuts this year. 

The BOJ started easing policies in August, executing the first interest rate cut since March 2020. 

Sterling Forecasts

Capital Economics’ analysts note that today’s data will likely open the door for additional UK rate cuts this year, thus dragging the pound down. 

Official UK data showed consumer prices rose 2.2% in July, below estimates of 2.3%, and up from 2% in June.

Core prices, excluding food and energy, rose 3.3%, below estimates of 3.4%, and down from 3.5% in the previous reading. 

The data bolsters the odds of a Bank of England interest rate cut in September as inflationary pressures recede. 

• New Zealand dollar is worst performing G8 currency 
• RBNZ cuts interest rates for first time in 4 years and hints at more policy easing in the future

The New Zealand dollar tumbled in Asian trade on Wednesday, giving up four-week highs against its US counterpart and becoming the worst performing G8 currency after the Reserve Bank of New Zealand cut interest rates for the first time in four years.

The RBNZ hinted at further policy easing in the near future, depending on the level of inflation in the country. 

Now experts expect the RBNZ to continue cutting rates by 0.25% chunks at upcoming meetings. 

The Price

The NZD/USD pair fell 1.2% today to 0.6006, with the highest since July 17 at 0.6084. 

The pair closed up 1% on Tuesday, the second rise in a row after US producer prices bolstered the odds of a 0.5% Fed rate cut in September.

Worst Performing Currency 

Kiwi became the worst performing G8 currency today, with a 1.2% slump against the US dollar, and over 1.1% losses against both euro and sterling, and about a 1% drop against the Canadian dollar. 

RBNZ

In an unexpected decision, the Reserve Bank of New Zealand cut interest rates by 25 basis points to 5.25%, the first such cut since March 2020. 

Most analysts expected no change in policies this month. 

The RBNZ said that policymakers agreed to ease policies and prepare for similar moves in the future to guard against a shrinking economy. 

The RBNZ expects interest rates at 3.85% by the end of 2025.

RBNZ Forecasts 

The RBNZ expects three more interest rate cuts by the middle of next year, estimating interest rates at 4.4% by the second quarter of 2025. 

Adrian Orr 

RBNZ Governor Adrian Orr said the bank went as far as considering to cut rates by 50 basis points but eventually went with 25 basis points. 

He asserted the central bank doesn’t feel any external pressures to cut rates, with focus solely on domestic GDP and inflation numbers. 

New Zealand Rate Prospects 

Betting markets expect 29 basis points of additional RBNZ rate cuts by October, and 67 basis points by the end of the year.