Commodities Daily - August 28, 2020

> Oil slides as US oil industry avoids major damage from Hurricane Laura. The market will today focus on eurozone consumer confidence for August, US personal income and spending for July, the final August University of Michigan consumer sentiment index and Baker Hughes rig data. We think the eurozone data is likely to disappoint oil bulls amid the rise in Covid-19 cases in August. The US economic data is likely to be mixed. Last week's Baker Hughes data was downbeat, showing a rare increase in US active rig counts, and it could provide a headwind later today as well. We expect Brent to trade sideways today in a $44.7-45.4/bbl range. Resistance at $46/bbl is very strong, while a potential break below $44.7/bbl would likely lead to a correction toward $44.3/bbl.> Gold ends the day 1.3% lower after a volatile session. After posting a 1.3% decline yesterday, gold prices rebounded to $1,950/oz this morning amid a weakening dollar. Fed Chairman Jerome Powell's speech yesterday during the virtual Jackson Hole symposium generated uncertainty in the market, which led to sharp intraday swings in gold prices. Today, the focus is on data, including Germany's GfK consumer confidence index, French GDP and CPI, and US wholesale inventories, personal income and outlays, and consumer sentiment. We expect gold prices to resume their climb higher today and settle close to technical resistance at $1,970/oz.OIL SLIDES AS US OIL INDUSTRY AVOIDS MAJOR DAMAGE FROM HURRICANE LAURAFront-month Brent was trading around $45.7/bbl yesterday morning before easing to as low as $44.6/bbl, with most of the decline coming in the aftermath of Fed Chair Jerome Powell's speech. He unveiled a new approach to setting US monetary policy that will involve letting inflation sometimes run faster than the Fed has traditionally allowed, in a shift that will likely keep interest rates low for years to come. Oil price headwinds also came from a strengthening dollar, as the Fed effectively placed more emphasis on boosting economic growth and less on worries about letting inflation run too high. The oil market was also focused on Hurricane Laura, which was expected to cause damage to the US oil industry, including oil production facilities and refineries. However, Laura has been downgraded from a Category 4 hurricane to a tropical storm and is racing further inland, having cut through the heart of the US oil industry in Louisiana and Texas without causing any widespread damage, as had been expected. This has caused oil and gasoline prices to retreat; they had gained positive momentum prior to Laura making landfall early on Thursday. Brent eventually settled at $45.09/bbl, $0.55/bbl below the previous settlement.This morning, front-month Brent gathered momentum on the back of dollar weakening, while the market focus has turned to today's release of eurozone consumer confidence for August, US personal income and spending for July, the final August University of Michigan consumer sentiment index and Baker Hughes rig data. We think the eurozone data is likely to disappoint oil bulls amid the rise in Covid-19 cases in August. The US economic data is likely to be mixed, as employment gains appear set to drive a rise in July personal consumption, though personal income could surprise to the downside as unemployment benefits have stopped and stimulus payments have receded. Last week's Baker Hughes data was downbeat, showing a rare increase in US active rig counts, and it could provide a headwind later today as well. We expect Brent to trade sideways today in a $44.7-45.4/bbl range. Resistance at $46/bbl is very strong, while a potential break below $44.7/bbl would likely lead to a correction toward $44.3/ LD ENDS THE DAY 1.3% LOWER AFTER A VOLATILE SESSIONThere were a couple of key macro data releases not long before Fed Chairman Jerome Powell began his much-anticipated speech yesterday. Initial jobless claims came in at 1.0 mln in the week to August 22, down slightly from the prior week's 1.1 mln, pointing to a gradual recovery in the labor market. Meanwhile, the second estimate of 2Q20 GDP growth came in at negative 31.7%, which was slightly better than the expected reading of negative 32.5%. This macro data, along with Powell's speech for the Jackson Hole symposium, made for a rather volatile session in the gold market yesterday. During the early part of the speech, gold prices climbed from $1,941/oz to nearly $1,975/oz, but once it became clear that Powell would not provide any concrete details on the Fed's plans, gold began to drop. It fell to as low as $1,914/oz at one point before recovering somewhat to close at $1,930/oz, which meant a 1.3% loss for the day. In his speech, Powell confirmed that the Fed would shift from flexible inflation targeting to targeting an average inflation level of 2% over time and highlighted that employment data would play a key role in its decision-making. There were also indications that interest rates would be kept lower for longer, which would exert a persisting drag on the dollar. Powell did not comment on the possibility of negative interest rates or yield curve targeting, and he did not provide any details on how the Fed will back up its new inflation strategy, which added to the confusion among market participants about how to interpret his remarks.Today, the focus is on data, including Germany's GfK consumer confidence index, French GDP and CPI, and US wholesale inventories, personal income and outlays, and consumer sentiment. We expect gold prices to resume their climb higher today and settle close to technical resistance at $1,970/