Month: June 2021

Authored by Joe Carson via TheCarsonReport.com,

Investors and businesses viewed the recent jobs and wage data differently. Investors saw the below-consensus gain in employment as friendly to risk-based assets. Companies would counter, saying it took three times the consensus gain (0.6%) in average hourly earnings, and probably other compensation-sweeteners, to attract the 559,000 workers in May.

Rising wages so early in a business cycle resemble the US economy of the 1970s, not the one investors and policymakers have seen since 1980. Rising labor costs will continue to put downward pressure on firms operating margins, which have already declined for the past two quarters, and add to general inflation pressures that policymakers would soon discover are not “transitory.” Investors and policymakers forewarned.

Evidence of A Fast Wage Cycle

In May, average hourly earnings for private-sector workers, excluding supervisory staff, rose 0.6%, three faster than consensus estimates. That comes on the heels of an even more significant 0.8% increase in April. That two-month increase is the fastest in this wage series since 1983 (excluding the wage distortions during the pandemic).

More importantly, it extends the rising wage cycle that has been quickly emerging for several months and runs counter to the early cycle decelerating wage pattern that has been a recurring feature for the past 40 years.

The National Bureau of Economic Research (NBER) has yet to date the end of the 2020 recession. Based on a long list of economic data, it’s reasonable to conclude that the recession’s end occurred in late 2020.

Comparing the wage data of the past six months shows a close resemblance to the 1970 economic cycles and not the business cycles the current generation of policymakers and investors has grown accustomed to seeing.

In the 1970s, wage growth started to accelerate immediately when the economy began to recover, similar to what is happening nowadays. Each period has unique features, but the common themes are the lack of labor supply and the need to raise pay to attract workers.

Both episodes contrast to the wage pattern that emerged in the four economic upturns from 1980 to 2020. In each of the four economic upturns since 1980, wage gains for private-sector workers decelerated for several years, enabling companies to source cheap labor and expand profit margins. Part of that deceleration also reflects the shift in hiring from relatively higher-paid to lower-paid workers.

Yet, in the past six months, over one-third of new jobs were created in the lower-paid industries (i.e., leisure and hospitality), and average hourly earnings growth still accelerated to its fastest rate since 1983.

Once started, wage cycles gain momentum of their own. Faced with a shrinking supply of skilled and unskilled labor, companies start competing with each other. And employed workers, along with people sitting on the sidelines, become well aware of the more worker-friendly environment and use it as leverage to gain more pay and benefits.

Record job vacancies say the wage cycle has a long life ahead and is not “transitory” or temporary.

With usage of the Fed’s overnight reverse repo facility again hitting a new record high on Tuesday, rising to an all-time high of $497.4 billion…

… rates traders are trying to decide if the Fed will tweak the rate on either the IOER (Interest on Excess Reserves) or the Reverse Repo Facility, collectively the Fed’s “administered rates” in order to ease the liquidity congestion that has parked half a trillion dollars at the Fed where it is sitting inert, doing nothing.

One strategist who believes there is a “small chance” the Fed will adjust its IOER/RRP rate is Deutsche Bank’s Steven Zeng, who also cited concern about the quarter-end balance sheet squeeze, which is less than the futures market is currently pricing.

As a reminder, the Fed’s ongoing $120BN in monthly QE and Treasury’s continued drawdown of its cash balance, create permanent reserves that are sitting on bank balance sheets.

At the same time, demand for deposits adds to the bloat and forces banks to supply these liabilities and hold lower-yielding assets.

This puts downward pressure on banks’ supplementary leverage ratios, so now institutions must either raise capital or reduce loans. In this context, the Fed’s RRP acts as a “release valve” for deposits to leave banks’ balance sheets via inflows into money funds, which are then deposited at the facility.

According to Zeng, and as we have explained previously, the main merit of raising the RRP rate is to make money funds a “more attractive option to bank deposits,” which can allow institutions to push out more deposits and better manage their balance-sheet size until a “more permanent change to bank capital rules is made.”

Currently, money-market yields are low and their margins are squeezed, so a boost to the RRP rate would make money funds a “more attractive option than bank deposits,” allowing more cash to leave the banking sector. Separately, JPMorgan writes that most money-market funds have not reached their counterparty limits at the Federal Reserve’s overnight reverse repurchase agreement facility so they may not have to adjust their thresholds at the moment.

Of course, one can’t have an increase in one rate without the other, since in the fed funds market, lenders who have access to the RRP will demand higher rates, but borrowers may respond with reduced demand leading to a “more erratic fed funds rate.” This means an increase in the RRP rate “needs to be accompanied by an equal or larger increase to the IOER.”

Zeng conveniently summarizes the costs and benefits of an administered rate tweak in the table below:

On the other end of the spectrum are Jefferies economists Thomas Simons and Aneta Markowska who pointed to recent rise in yields at Treasury bill auctions in anticipation of potential Federal Reserve adjustments to its adminstered rates, but according to the duo, “the rise could compel the central bank to stay put.” (earlier this week, the Treasury sold 3-month bills at 0.025% and 6-month bills at 0.04%, which were both the highest stopout yields since April 19).

Simons and Markowska explain the reflexive paradox as follows: “concerns about an IOER hike are preventing yields from falling any further, despite the huge amount of cash looking for a home in the front-end.” As a result, “perversely, this concern may actually prevent an IOER hike, should yields continue to hover at these levels.”

Another paradox: the two conclude that “it is hard to see the Fed judging that there is ‘undue pressure’ on the front-end even” even as the Fed reverse repo is expected to rise above $500 billion today.

So what does the market think? Well, according to Curvature’s repo guru Scott Skyrm, as of this moment the market does not appear to be expecting an IOER hike by the Fed next week, meaning that consensus expected Powell & Co. to do nothing to ease the record liquidity parked at the Fed.

As the Curvature strategist wrote in a Tuesday note, “the market is pricing two things from the Fed. First, it’s pricing the first tightening in 2023 – according to the fed funds futures contracts [graph upper right]. Too far out to even guess the month! Second, the market is pricing the GC/fed funds spread to gradually narrow over the next year. Whereas GC is averaging between 5 and 6 basis points below fed funds now, it’s expected to trade flat to fed funds within a year.”

As Skyrm concludes, “there are only two possible Fed “technical adjustments” that can raise Repo rates: QE tapering and an RRP rate increase. An increase in the IOER would raise both fed funds and Repo GC, so we could say the market is NOT pricing an IOER increase.“

One final reason why the Fed is almost guaranteed to do nothing to administered rates and allow the liquidity glut to keep rising is that as the Fed’s new whisperer at the WSJ, Michael Darby wrote yesterday “Fed Is Fine With Reverse Repos Nearing Half a Trillion ” in which he wrote:

Many market participants have looked at the reverse repo activity with some unease. Financial firms have been willing to take the zero percent the Fed offers them through the facility in large part because there are few other short-term investments available, and in some cases, these private market investments actually cost money to invest in. That makes the Fed’s zero percent repo rate attractive on a relative basis.

“The system is working exactly as designed,” New York Fed President John Williams said in a video interview on Yahoo Finance last Thursday. The reverse repo facility, he added, is “working really well and the fact that funds are flowing between the banking system and our overnight reverse repos, this is kind of how we would expect that to happen” given the level of money coursing through short-term markets.

The growing use of the reverse repo facility follows Lorie Logan, who manages the Fed’s massive $7.9 trillion holdings of cash and securities, having said recently that the central bank would rely on it more and expand the number of firms that could access it. The timing of that shift lined up with the wall of cash that started flowing to the Fed.

What is happening at the reverse repo facility doesn’t have much of a broader economic impact. Meanwhile, central bankers have become confident enough in the general health of financial markets to debate pulling back on their $120 billion a month in bond buying stimulus.

And so, with the Fed facility set to keep rising, the question is will we hit $1 trillion in inert liquidity at the Fed before the Fed does agree that someone is wrong, or will an amount of cash greater than the market cap of bitcoin and ethereum remain frozen inside some Fed server…

Authored by Jeff Carlson and Hans Mahncke via The Epoch Times,

The two most significant articles promoting the “natural origins” theory for the COVID-19 outbreak originated from scientists who were part of a response team of “experts” brought in by the National Academies of Sciences, Engineering, Medicine (NASEM), in response to a request from a White House official.

(L-R) Thea Fischer, Marion Koopmans, Peter Daszak and other members of the World Health Organization (WHO) team investigating the origins of the Covid-19 pandemic, leave the Hilton Wuhan Optics Valley Hotel in Wuhan, on Jan. 29, 2021. (HECTOR RETAMAL/AFP via Getty Images)

These influential articles were used extensively by media organizations to push the natural origins theory, while simultaneously deriding alternative theories—including that of a possible lab leak—as conspiracy theories.

The articles appear to have been part of a coordinated effort originating from a Feb. 1, 2020, teleconference organized by Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases (NIAID), and Dr. Jeremy Farrar, director of the British Wellcome Trust, which took place after a group of health officials scrambled in late January 2020 to respond to public reporting of a potential connection between COVID-19 and the Wuhan Institute of Virology in China.

Following the officials’ conversations, public discussion of the source possibly being a lab leak was actively suppressed by social media platforms, health officials, and the World Health Organization (WHO).

The first article, designed more as an open letter to the public, was published on Feb. 19, 2020, and signed by a number of scientists. An early-morning email on Feb. 6, 2020, (p. 251) obtained through a Freedom of Information Act request by U.S. Right to Know, revealed that EcoHealth President Peter Daszak drafted the letter calling for “solidarity with all scientists and health professionals in China.”

Daszak’s organization in the past had received $3.7 million in funding from Fauci’s NIAID, at least $600,000 of which was sent to the Wuhan Institute.

The P4 laboratory on the campus of the Wuhan Institute of Virology in Wuhan, Hubei Province, China, on May 13, 2020. (HECTOR RETAMAL/AFP via Getty Images)

Daszak’s letter notes that “transparent sharing of data on this outbreak is now being threatened by rumours and misinformation around its origins.”

“We stand together to strongly condemn conspiracy theories suggesting that COVID-19 does not have a natural origin,” states the letter signed by 27 scientists.

The second article, “The Proximal Origin of SARS-CoV-2,” published on Mar. 17, 2020, in the journal Nature, targeted the scientific community. This article was led by “corresponding author”  Kristian Andersen, who recently deleted his entire Twitter profile, along with four other researchers.

Notably, of the five scientists credited with writing the article, four had directly participated in the Fauci–Farrar teleconference—which was described in an Feb. 1, 2020, email from Farrar (p. 3,197) as a “discussion … shared in total confidence.”

The one author not present on the Feb. 1, 2020 Teleconference has since recanted his position.

NASEM: Additional Data ‘Needed to Determine the Origin and Evolution of the Virus’

Immediately prior to Daszak circulating the draft of the Lancet letter, there was a meeting (p. 116) on Feb. 3, 2020, organized by the National Academies of Sciences, Engineering, Medicine (NASEM), that reportedly included “officials from the FBI, the Office of the Director of National Intelligence, along with the NIH and the Department of Health and Human Services.”

The hastily assembled meeting came at the same-day request of White House Office of Science and Technology Policy (OSTP) Director Kelvin Droegemeier, who asked the NASEM to “help determine the origins of 2019-nCoV.”

The NASEM meeting came two days after the Fauci–Farrar teleconference. Internal emails of Fauci released through open records requests reveal the teleconference was prompted by the publication of an article in Science that referenced a Nov. 9, 2015, article in Nature about gain-of-function experiments that were being conducted at the Wuhan lab using “chimeric viruses” in mice and funded by Fauci’s organization.

The NASEM meeting included a 10-minute presentation (p. 116) from Fauci during the one-hour gathering, and also included both Daszak and Andersen.

NIAID director Dr. Anthony Fauci listens during a Senate Appropriations Labor, Health and Human Services Subcommittee hearing looking into the budget estimates for National Institute of Health and state of medical research on Capitol Hill in Washington, on May 26, 2021. (Sarah Silbiger/Pool/Getty Images)

The internal emails suggest that there was significant internal debate following the formal meeting—from both officials at NASEM and the experts called in by the organization for advice—on the official response to Droegemeier’s request.

Andersen responded to the discussion by Daszak and the rest of the expert group by email (p. 125) on Feb. 4, 2020, writing: “I do wonder if we need to be more firm on the question of engineering. The main crackpot theories going around at the moment relate to this virus being somehow engineered with intent and that is demonstrably not the case. Engineering can mean many things and could be done for either basic research or nefarious reasons, but the data conclusively show that neither was done.”

However, just days prior, immediately preceding the Feb. 1, 2020, Fauci–Farrar teleconference, Andersen had sent Fauci an email that noted that “one has to look really closely at all the sequences to see that some of the features (potentially) look engineered.”

The NASEM response was also shaped by Trevor Bedford, a computational biologist who suggested: “1. I wouldn’t mention binding sites here. If you start weighing the evidence there’s a lot to consider for both scenarios. 2. I would say ‘no evidence of genetic engineering’ full stop.”

Events were moving rapidly. On Feb. 4, 2020, Andrew Pope of NASEM wrote to the participants, noting: “Plans have changed in terms of our product. Instead of a ‘Based on Science’ web posting, we are now developing a letter that will be signed by the 3 Presidents of our 3 Academies.”

After much deliberation, a Feb. 6, 2020, response from NASEM’s Marcia McNutt, John Anderson, and Victor Dzau was sent to the White House’s Droegemeier, which noted that the NASEM had “consulted leading experts … that could help elucidate the origin and evolution of 2019-nCoV.”

Contained within the letter was the official opinion from the NASEM’s panel of experts, who “informed us that additional genomic sequence data from geographically- and temporally-diverse viral samples are needed to determine the origin and evolution of the virus.”

Drafts of Daszak and Andersen Letters are Circulated

One day prior to the official NASEM response, however, Daszak was already circulating his letter dismissing laboratory origins as a conspiracy theory. And according to Andersen’s co-author Robert Garry, a draft of Andersen’s March 17, 2020, “The Proximal Origin of SARS-CoV-2” article for Nature was also circulating by the time of NASEM’s response.

Ralph Baric, a virologist who collaborated with Wuhan Institute of Virology director Shi Zheng-Li on gain-of-function experiments, was included in early drafts of Daszak’s letter. In a Feb. 6, 2020, email Daszak wrote that there was “no need for you to sign the ‘Statement’ Ralph!!” to which Baric responded: “I also think this is a good decision. Otherwise it looks self-serving and we lose impact. Ralph”

Notably, Baric was the corresponding author of the Nov. 9, 2015, Nature article that sparked the initial scramble leading to the Feb. 1, 2020, conference call initiated by Fauci and Farrar.

During the circulation of his drafts, Daszak told people (p. 273): “I’ve come up with an initial list below. Please suggest names of your colleagues that you think might also be willing to support this.”

Daszak closed (p. 274) by telling those privy to the early draft, “Please note that this statement will not have EcoHealth Alliance logo on it and will not be identifiable as coming from any one organization or person, the idea is to have this as a community supporting our colleagues.”

Interestingly, a day earlier, when Dazsak first began the process of circulating his draft, he stated that he “should not sign this statement, so it has some distance from us and therefore doesn’t work in a counterproductive way.” Daszak continued, “We’ll then put it out in a way that doesn’t link it back to our collaboration so we maximize an independent voice.”

It is not clear why Daszak changed his mind, ultimately becoming a signatory to the letter.

The Feb. 19 Lancet article was signed by 27 scientists from around the world. Although only two signatories, Farrar and Christian Drosten, were actually present on the Feb. 1 teleconference, at least five were directly affiliated with EcoHealth Alliance. Additionally, two were partners of EcoHealth. These affiliations weren’t declared in the Lancet letter. Instead, the authors specifically declared that they had no competing interests.

Additionally, five of the signatories worked with or for the Wellcome Trust headed by Jeremy Farrar.

Some signatories unaffiliated with either the Feb. 1 teleconference or EcoHealth have recently changed their minds on the origins of the virus. Stanley Perlman now says that the lab leak theory is “back on the table.” And signatory Charles Calisher claims that it was “over the top” to call the lab leak a conspiracy theory.

Another signatory, Peter Palese, is now demanding a proper investigation. Most notably, University of Chicago professor Bernard Roizman has stated that the virus originated from the lab due to “sloppiness,“ claiming that Wuhan lab personnel “can’t admit they did something so stupid.”

A woman caught the attention of the mainstream press earlier this week after lavishly praising Vice President Kamala Harris and even claiming that she voted for the VP and President Joe Biden during a press conference.

“It’s an honor… I voted for you,” says a Univision reporter before asking a question at VP Harris’ press conference pic.twitter.com/HsjRtTcJB1

— Daily Caller (@DailyCaller) June 8, 2021

Harris was taking questions at a press conference in Mexico City when her chief spokesperson Symone Sanders announced that the “next question will come from Maria Fernanda at Univision,” a well-known Spanish-language media company that’s popular in the US and Mexico.

The woman was permitted to ask the VP a question at the Tuesday presser, one of just five journalists called on by staffers for Harris. Before doing so, however, the woman took the opportunity to tell Harris “it’s an honor because I actually got to vote for the first time as a naturalized citizen, and I voted for you.”

Afterwards, when the question drew the attention of the press, both Harris’s team and Univision said they had no idea who the woman was.

In fact, Univision had another reporter at the event, Jesica Zermeno, and it soon was revealed that the woman who asked the question and said she voted for Harris actually had no connection to the media outlet.

While a reporter by the name of Maria Fernanda Lopez does work for a Miami-based Univision affiliate, she tweeted early Wednesday that she was not the woman who appeared at the Harris presser.

.@UniNoticias reporter to VP Harris: “I VOTED FOR YOU”.
As if there was any doubt. pic.twitter.com/6VGRBZLybX

— Jorge Bonilla (@BonillaJL) June 8, 2021

After the press conference, Univision’s president for news in the US Daniel Coronell said that the individual who asked the question was not employed by Univision, and had no connection to the network.

In Mexico an individual which has no association with @Univision claimed to be a reporter for @UniNoticias in order to ask the @VP a question and to compliment @KamalaHarris. Let it be clear to everyone that Ms. Maria Fernanda Reyes is not part of this media organization https://t.co/edxyzRVlt8

— Daniel Coronell (@DCoronell) June 9, 2021

Harris’s top aide and press chief Symone Sanders tweeted that she would be “looking into” how the mysterious woman was allowed to ask a question.

Thank you for bringing this to our attention. We are looking into this. https://t.co/5gVsyOoudr

— SDS (@SymoneSanders46) June 9, 2021

Theories quickly proliferated online, with critics of both Harris and Univision suggested the mishap could indicate a major “security breach,” or that the media outlet has not been fully forthcoming about its link to the woman.

#BREAKING: I have a HUGE update to this story about a Univision “reporter” telling Vice President Harris she “voted for” her in November. According to top @UnivisionNews personalities and execs tweeting at @MRCLatino‘s @BonillaJL, they’re claiming she’s NOT an actual employee. pic.twitter.com/QVhprd2XzR

— Curtis Houck (@CurtisHouck) June 9, 2021

This means either one of two things:
1. @UnivisionNews and @UnivisionPRTeam are lying to us and they have a journalistic scandal on their hands.

2. They broke through the @SecretService and the @VP‘s press team led by @SymoneDSanders, which would mean this was a security breach.

— Curtis Houck (@CurtisHouck) June 9, 2021

This is a major security breach. How did that happen??? I’m actually worried someone with false credentials got this close to MVP. This time everything ended “well” and no one was hurt, but what about next time?

— Olivia 💛🐝 it’s VP HARRIS (@itsmadamvpforya) June 9, 2021

Yikes, that’s a pretty big security breach.

— JellyKind (@JellyKind) June 9, 2021

However, Fox News appeared to get to the bottom of the matter when it spoke to the woman. Fox News reported Tuesday that the woman, Maria Fernanda Reyes, who had asked the question at Harris’s press conference, had been incorrectly identified as a Univision employee. Instead, Reyes is an entrepreneur who spends a lot of time traveling and working with farmers in the US, Mexico, and India, and had been invited to attend the press conference by fellow entrepreneurs.

So far, Harris and her team have yet to confirm whether that’s true or not.

This isn’t the only strange new controversy to emerge from Harris’s trip: she snapped at an NBC News reporter after being caught in a lie about the border.

Authored by Isabel van Brugen via The Epoch Times,

Former President Donald Trump on Tuesday praised the Nigerian government’s decision to block access to Twitter, and called on other countries to do the same.

Trump applauded the Nigerian government’s move to indefinitely suspend Twitter’s activities, two days after the social media giant removed a post by Nigerian President Muhammadu Buhari that threatened to punish regional secessionists in the West African country.

“Congratulations to the country of Nigeria, who just banned Twitter because they banned their President,” Trump said in a statement. 

“More COUNTRIES should ban Twitter and Facebook for not allowing free and open speech—all voices should be heard.”

“In the meantime, competitors will emerge and take hold,” Trump continued.

“Who are they to dictate good and evil if they themselves are evil?”

The former president suggested that the reason why he didn’t ban Facebook while he was in office was because Facebook CEO Mark Zuckerberg “kept calling me and coming to the White House for dinner telling me how great I was.”

“2024?” Trump added, teasing a potential presidential run.

The former president hosted Zuckerberg at the White House twice in 2019. Earlier this month, Trump again hinted at a possible run for the presidency while responding to the news that he’ll be banned from Facebook for two years, saying he won’t attend dinners requested by Zuckerberg “next time I’m in the White House.”

The former president has been banned from Facebook until 2023, and he has also been permanently removed from Twitter following the Jan. 6 Capitol breach.

Nigeria’s Information Minister Lai Mohammed said the government had blocked Twitter access because of “the persistent use of the platform for activities that are capable of undermining Nigeria’s corporate existence.”

Nigeria’s Information Minister Lai Mohammed speaks during a news conference in Abuja, Nigeria, on Nov. 19, 2020. (Afolabi Sotunde/Reuters)

Nigeria’s President Muhammadu Buhari in Paris, France, on May 18, 2021. (Ludovic Marin/Pool via Reuters)

“Many of those misbehaving today are too young to be aware of the destruction and loss of lives that occurred during the Nigerian Civil War,” the removed post from Buhari read, referring to the Biafra War between 1967 and 1970 which killed more than one million people.

“Those of us in the fields for 30 months, who went through the war, will treat them in the language they understand.”

That post violated Twitter’s “abusive behavior” policy, the social media giant said. The company also suspended Buhari’s Twitter account for 12 hours.

“We are deeply concerned by the blocking of Twitter in Nigeria. Access to the free and #OpenInternet is an essential human right in modern society,” Twitter said in a statement.

“We will work to restore access for all those in Nigeria who rely on Twitter to communicate and connect with the world.”

Nigeria’s media regulator, the National Broadcasting Commission (NBC), meanwhile called on all TV and radio stations to delete their accounts and “desist from using Twitter as a source…of information gathering for news.”

“It would be unpatriotic for any broadcaster in Nigeria to continue to patronise the suspended Twitter as a source of its information,” NBC’s director, Armstrong Idachaba, said.

Twitter and Facebook didn’t immediately respond to requests for comment by The Epoch Times.

Oil prices are holding yesterday’s gains this morning after US Secretary of State said that Iran will remain under significant sanctions, lowering traders’ odds of a sudden rush of supply back into the markets, although we note that Libya’s oil output is picking up again after a pipeline leak that caused a brief reduction was fixed.

“The widespread faith that oil demand growth will trend significantly higher in the second half of the year is paving the way forward for the price rally,” PVM analysts said.

For now, the next leg may depend on if US production can remain disciplined as stocks of crude continue to slide.

API

• Crude -2.108mm (-3.5mm exp)

• Cushing -420k

• Gasoline +2.405mm

• Distillates +3.752mm

DOE

• Crude -5.241mm (-2.9mm exp)

• Cushing +165k

• Gasoline +7.046mm

• Distillates +4.412mm

Crude stocks fell more than expected last week but product inventories rose significantly…

Source: Bloomberg

Overall crude stocks are now below their 5-year average…

Source: Bloomberg

US crude production remains rather notably flat (rebounding from the prior week’s maintenance drop) in the face of higher prices and rising rig counts…

Source: Bloomberg

How much longer will they remain disciplined?

In a report, the EIA noted that while rigs are being added with recent price increases, it isn’t happening quite as fast as before, and the agency has cut responsiveness of rig deployments in the Permian to upward oil price movements. This could either be down to drillers sticking to austerity measures, or they are simply waiting for prices to jump even more.

WTI hovered around $70.50 ahead of the official inventory data

Potentially dampening prices, the latest crackdown by Chinese authorities to curtail the country’s bloated refining sector could see Chinese crude imports fall by around 3%, or around 280,000 barrels per day, according to sources.

After earlier this week US Secretary of State Antony Blinken somewhat pessimistically portrayed that it remains “unclear” whether Iran is actually willing to restore the nuclear deal, prompting angry words from Foreign Minister Javad Zarif who again pointed out that it’s only Washington not in compliance due to Trump-era sanctions which the Biden White House refused to “bury” in order to make a renewed deal possible, Blinken’s newest statements are pouring more cold water on all the recent speculation that prematurely hailed a Vienna agreement as imminent. 

During a Tuesday hearing before a US Senate committee the US top diplomat was asked about his assessment of progress at Vienna, to which he frankly replied that hundreds of sanctions targeting Iran are likely to remain in place even if Iran and the United States return to compliance. “He said he would anticipate some sanctions would remain in place, including ones imposed by the Trump administration,” according to his words in RFE/RL.

“If they are not inconsistent with the JCPOA, they will remain unless and until Iran’s behavior changes,” Blinken testified before the Senate Appropriations Committee.

Lately the more enthusiastic and optimistic accounts of how things are going in Vienna have tended to come only from the Iranian side, as well as in some instances Russia. For example Iranian chief negotiator Abbas Araqchi indicated last week that this current round of talks could be “conclusive” and lead to a final agreement. Yet at the same time State Department spokesman Ned Price had said, “There are some hurdles that remain that we haven’t been able to overcome in those five rounds.” At sixth round is expected to start Thursday.

Upon Blinken’s Tuesday comments, and with the Iran deal now looking more elusive, oil prices have continued to climb this week, after at the start of the month US crude futures had reached their highest in over two-and-a-half years after the OPEC+ alliance forecast a tightening global market, coupled with the increasingly cautious statements out of US negotiators in Vienna over reaching a deal.

It was on Sunday that US oil prices hit $70 a barrel for the first time in almost three years, and have inched higher since, also amid predictions of $80 oil this summer – assuming no breakthroughs in Vienna. 

As Goldman in analysis published last month forecast:

“…despite the global market deficit coming in line with our forecasts in recent months, we under-estimated the weight of such demand and Iran uncertainties, keeping prices trading below our $75/bbl 2Q21 fair value”… “With growing evidence of the demand rebound, and imminent clarification on the likelihood of an Iranian return, we now see a clearer path for the next leg higher in oil prices, with the sell-off offering opportunities to position for the rally to $80/bbl.”

It remains unclear whether @POTUS and @SecBlinken are ready to bury the failed “maximum pressure” policy of Trump and @mikepompeo, and cease using #EconomicTerrorism as bargaining “leverage”.

Iran is in compliance with the #JCPOA. Just read paragraph 36.

Time to change course.

— Javad Zarif (@JZarif) June 7, 2021

It should be recalled that it was an explicit strategy of the prior Trump administration to try and “box-in” Biden on Iran. During the final months of the Trump White House, the Republic administration had on a weekly and almost daily basis rolled out a “mine field” of sanctions and punitive actions slapped on over 700 Iranian entities and officials.

The idea was to create immense hurdles for any rapid rollback of those sanctions, no matter how willing a future administration – and that seems to now be showing its effects. 

Unlike recent months, when the Bank of Canada surprised markets by becoming one of the first to taper its QE, there were no surprises in today’s BOC announcement, with the central banks keeping the rate unchanged at 0.25% as expected, while also keeping its weekly purchases and forward guidance both unchanged too.

The BOC said it will hold current level of policy rate “until inflation objective is sustainably achieved,” while continuing its quantitative easing at a rate of CAD$3BN per week, while keeping expectations intact for another reduction in emergency stimulus levels next month.

“We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. Based on the Bank’s latest projection, this is now expected to happen some time in the second half of 2022,” the BoC said in its statement Wednesday.

The bank said that while COVID-19 cases are “falling in many countries and vaccine coverage rising” leading to a pick up in global economic activity, the bank cautioned that “growth remains uneven across regions.”

The US is experiencing a strong consumer-driven recovery and a rebound is beginning to take shape in Europe, while a resurgence of the virus is hampering the recovery in some emerging market economies. Financial conditions remain highly accommodative, reflected in broadly higher asset prices. Commodity prices have risen further, notably oil, and the Canadian dollar has seen a further appreciation.

Some other notable highlights from the statement:

• Commodity prices have risen further, notably oil, and the Canadian dollar has seen a further appreciation.
• In Canada, economic developments have been broadly in line with the outlook in the April Monetary Policy Report (MPR).
• We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved.
• Based on the Bank’s latest projection, this is now expected to happen some time in the second half of 2022.
• While CPI inflation will likely remain near 3 percent through the summer, it is expected to ease later in the year, as base-year effects diminish and excess capacity continues to exert downward pressure.
• Housing market activity is expected to moderate but remain elevated.
• Strong growth in foreign demand and higher commodity prices should also lead to a solid recovery in exports and business investment.

And here is a redline comparison of the BOC statement courtesy of Newsquawk:

And since the BoC statement was largely a reiteration of the April statement, there was barely any reaction in the USDCAD which was effectively flat on the decision.