Oil worries, job slowdown and mega MAGA borrowing requirement
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Why is the US Treasury targeting a $1 trillion Q3 borrowing requirement?
Well, the Fed is just a day away, but the US Treasury has said their budget requirement, their borrowing requirement for Q three is one trillion dollars. That's all. Meanwhile, conflicting messages. Consumer confidence is rising, but house prices are falling. The US trade deficit is narrowing, which will help GDP, which is out today. But oil is still pushing higher as President Trump shortens that deadline for Russia to end the war. And the Fed and the Bank of Canada tonight as well. It's busy, busy, busy. It's Wednesday, the thirtieth of July twenty twenty five. It's the morning call from Nab. Good morning. So the US dollar is higher again today, adding another third of one percent on the DXY, getting over ninety nine point one earlier.
The Aussie is down about naught point one per cent, uh to just over sixty five point one US cents. The Euro though down naught point four percent, the Swiss franc down naught point three per cent, the Canadian dollar has lost a quarter percent, and US stocks losing ground at the close, half a percent off the down, naught point three per cent off the S and P and the Nasdaq down a third of one. But the reverse is true for Europe, which did badly, of course, on Monday, but now the DAX up over uh 1.5%, three-quarters of one percent for the Eurostocks 50 and 0.6% for the FTSE one hundred. And quite a fall in ten-year Treasury yields today, down nine basis points to four point three two percent, compared to a small rise in yields for much of Europe.
Aussie ten years finished at four point three two percent as well yesterday. uh just one basis point higher now on futures. And oil today up another four percent for WTI and three point eight percent for Brent. Brent is easing back up to seventy three a barrel, certainly well over the seventy mark now. And Nab Sally Ald is with me today. And uh good on President Trump. He's got his uh UK trade deficit for goods down uh thanks to an eleven and a half uh billion dollar fall in goods Goods imports, although uh we did see of course a bit a bit of a rush of imports pre tast, didn't we?
How is the narrowing US trade deficit expected to boost Q2 GDP?
So I guess this is perhaps just a bit of a correction, is it?
Yeah, morning Phil. So that's right. So we've got the advanced numbers on the US uh trade balance for June and as you said narrowed quite sharply. um with imports down uh a little bit over four percent in the month. Uh and I think if we sort of abstract from some of that uh you know front loading volatility that you just mentioned um and look at you know what consumer goods imports are like relative to perhaps where they were in the back half of twenty twenty four before you know we entered uh sort of this new world of US trade policy, consumer goods imports are down about seventeen percent. Um relative to the average level of the second half of last year. So that's a a pretty meaningful decline uh on net.
Um, which maybe tells you that, you know, the I guess the the tariffs are are starting to work and you are seeing some shifts in demand and possibly some substitution uh to to goods. that are that are produced domestically. But I guess importantly for markets, um, what this bigger narrowing in the trade deficit in June tells us is that um net trade is probably gonna make an even bigger contribution to GDP for the second quarter. And so most forecasters look like they've just nudged up their their forecasts for second quarter GDP. From around I think the consensus was sort of close to two and a half percent annualised for the quarter, and now people are looking at sort of three, three and a quarter percent annualised.
So pretty meaningful um Yeah.
So long as that substitution that you talk about happens and it's just that people just aren't buying stuff, of course.
Well that's the other possibility. That's right. And and I guess, you know, we have seen um you know, uh an underlying narrative of softness in consumer spending through the first half of the year. Definitely relative to what we saw in the back half of last year and so maybe, you know, the the the decline in imports of consumer goods does also re reflect a demand story that's perhaps not as robust as it was last year.
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Chapters
8 chapters
1
Why is the US Treasury targeting a $1 trillion Q3 borrowing requirement?
0:01–1:56
2
How is the narrowing US trade deficit expected to boost Q2 GDP?
1:56–4:10
3
What do the latest Conference Board numbers reveal about consumer confidence and labour‑market worries?
4:10–5:52
4
Why are job‑opening and unemployment indicators suggesting a softening labour market?
5:52–8:15
5
How are President Trump’s tightened sanctions on Russia influencing oil prices?
8:15–10:33
6
What uncertainties remain around the EU‑US trade deal and its market impact?
10:33–12:40
7
How might the pace of US‑China negotiations affect global growth forecasts?
12:40–15:19
8
What are the expectations for Australian CPI, rate cuts and the upcoming Fed decision?
15:19–16:29