In today’s briefing:
- Calm Before the Currency War? Central Banks Go Their Separate Ways
- The Animal Spirits Are Back in Charge!
- The Surprise Victor of the Israel-Iran War
- LATAM: The Conviction Overweight in a Benchmark-Driven World
- Copper Breaches 10k USD: Easy Journey to 11k USD/Ton On Lower Inventories In The Short Term
- Iron Ore: Small Bounce to 100 USD/Ton On Oversold Levels
Calm Before the Currency War? Central Banks Go Their Separate Ways
- European central banks have embraced a more preemptive approach compared to the Fed in responding to the looming arrival of tariffs under the Trump administration.
- The Bank of Japan refuses to raise interest rates, despite rising core consumer price inflation, due to uncertainty about tariff negotiations with the US. Quantitative tightening will pared in 2026.
- The People’s Bank of China (PBoC) has only modestly lowered policy rates. The Fed’s future policy rate cuts could determine the timing and scope of future PBoC policy easing.
The Animal Spirits Are Back in Charge!
- The market’s animal spirits have taken control of the tape and U.S. equity prices appear to be headed for further highs.
- Medium- and long-term indicators have improved sufficiently that we are upgrading our Trend Asset Allocation Model from neutral to bullish.
- However, investors should monitor non-confirmation patterns from commodity prices that may be signs of signal reverse in the coming weeks.
The Surprise Victor of the Israel-Iran War
- The surprise victor in the Israel-Iran conflict may be the bond market, which will exact a cost by imposing a fiscal discipline on the combatants.
- Foreign policy objectives are likely to lead to a protracted and simmering conflict that raises an uncertainty premium on asset prices.
- The markets experienced elevated levels of uncertainty and volatility under Trump 1.0, and we expect a similar environment under Trump 2.0.
LATAM: The Conviction Overweight in a Benchmark-Driven World
- LATAM remains a core and consensus overweight among active EM managers, with 85% of funds positioned ahead of the MSCI EM benchmark
- LATAM exposure is concentrated in Brazil, Mexico, and Argentina, which together make up 90% of the region’s allocation.
- Banorte remains the most widely held stock in the region, with Embraer SA and Gentera staging notable recoveries from the low positioning levels seen in 2021 and 2022.
Copper Breaches 10k USD: Easy Journey to 11k USD/Ton On Lower Inventories In The Short Term
- Inventory depletion across the LME and SHFE continued as copper prices breached the 10k USD level to end the week 3.7% higher.
- The COMEX-LME spread breached $1,000/ton again, leading us to be confident that there will be a further rally in the short term.
- We see an easy journey to 11,000 USD/ton on a weaker dollar, stronger COMEX premiums, depleted inventory levels, and lower-than-expected global production.
Iron Ore: Small Bounce to 100 USD/Ton On Oversold Levels
- Iron ore prices rose 2.3% WoW from oversold levels since our last report, Iron Ore Tracker (23-June-2025): Iron Ore Due for A Small Bounce? to $95/ton
- In the short term, prices could reach $100/ton, but persistent medium-term supply overhang from the Simandou project may pressure prices down to $85/ton.
- We like Fenix Resources (FEX AU) for its massive ramp-up from 1.5 to 4.1 million tons. read: Fenix Resources (FEX AU): Q3 FY25 Concall Update + CZR News
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