Oil Slips on Iran Ceasefire Talk; AUD Hits 12-Week High on CPI
Oil fell on unconfirmed US-Iran ceasefire report, while the Australian dollar hit a 12-week high after hot CPI data boosted RBA rate hike odds above 35%. Japan services prices firmed.
Oil slid in after-hours trading after Russian news agency RIA, citing Pakistani and Iranian sources, reported an agreement on a US-Iran ceasefire that would allow free navigation through the Strait of Hormuz. The report remained uncorroborated by Western media or Iranian state outlets. It continued to weigh on prices through the session.
Separate reporting from Axios added to the de-escalatory tone. Secretary of State Marco Rubio told allied foreign ministers the US is shifting its approach from military strikes to sanctions on Iran for now, citing the naval blockade and mine clearance operations in the Strait of Hormuz as having reduced Tehran's leverage over global oil flows. Reuters reported that the US has begun returning staff to Middle East embassies that were evacuated or downsized during the Iran war, with posts in Lebanon, Israel, Saudi Arabia and Baghdad among those being restaffed.
On the rates front, Richmond Fed President Tom Barkin, cited by Bloomberg, warned that rising US debt will eventually lead to a reckoning, cautioning that at some point investors could stop buying US debt. Barkin maintained his preference for holding interest rates steady given evidence of easing inflation, while acknowledging that officials may need to raise rates if price pressures become embedded.
Trade tensions between the US and Canada escalated further. A White House official said the Trump administration is considering additional tariffs against Canada after Prime Minister Mark Carney announced retaliatory tariffs set to take effect from 8 September. The official said President Trump retains a range of tools to resolve the dispute should negotiations fail to resume. The Canadian dollar weakened against the US dollar, which was broadly stronger.
Australia's July CPI came in well above expectations, with core inflation particularly firm, bringing a Reserve Bank of Australia rate hike at the 28-29 September meeting firmly into play. The data raises the risk that inflation remains too high and fails to fall in line with the RBA's own forecasts. Markets responded quickly, sending the Australian dollar to a 12-week high, with pricing for a September RBA hike jumping to more than 35% from just above 10% the previous day.
In Japan, the Corporate Services Price Index rose 3.6% year on year in July, beating forecasts and up from a revised 3.4% in June, reinforcing signs of broadening inflationary pressure and adding further weight to expectations of a near-term Bank of Japan rate hike. Separately, the BOJ confirmed that Governor Kazuo Ueda will not attend this week's Jackson Hole symposium, with board member Naoki Tamura attending in his place. The data builds on the case for tighter policy, similar to the signals from the Japan PPI release.
Elsewhere, the People's Bank of China set today's USD/CNY midpoint notably wider than market estimates, the largest such deviation since 27 February. Japanese and South Korean shares both rose in early trade, with investors positioning ahead of Nvidia's earnings and the US PCE inflation report, both due later on Wednesday.
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