Highlights
US Monetary Policy Report: A focus on the positive
The details of the Monetary Policy Report and the chair’s testimony to the Senate Banking Committee are largely in line with the outcome of the June FOMC meeting. While the Fed expresses concern about the loss of momentum in labor markets, it is reluctant to put too much weight on these recent developments, and the FOMC retains its baseline outlook for an ongoing modest recovery in activity, further strengthening in labor markets, and a gradual return of inflation to the Fed’s 2 percent target. Hence, we continue to expect one rate increase this year in September assuming that labor market data rebound and pending the outcome of the UK referendum. If labor markets do not rebound and near- to medium-term recession risks rise, then we see a risk that the Fed could change its tightening bias altogether.
Commodities
China copper trade data: Exports soar in May
Following a slowdown in copper imports in April, the May results for China’s copper imports show a similar trend of growth y/y but a continued decline m/m. Net imports of refined copper collapsed 24% m/m as a result of a surge in copper exports, which was aided by a reverse arbitrage window and sagging domestic demand. Elsewhere, scrap imports held level while concentrate imports continued to climb. We stand by our call for mediocre copper import results in the coming months, as demand within China slows.
