EU Sanctions Disrupt Russian Oil Trade, India Resumes Diesel Exports to China After Four-Year Hiatus

Economic

Commodity

Summary:

India has shipped its first diesel cargo to China since April 2021 as EU sanctions on Russian-linked oil operations disrupt global fuel flows, forcing Nayara Energy partly owned by Russia’s Rosneft to redirect exports....

Rare Diesel Shipment Marks Shift in Trade Patterns

The EM Zenith departed India’s Vadinar port on July 18 carrying roughly 496,000 barrels of low-sulphur diesel from Nayara Energy’s refinery. Initially bound for Malaysia, the vessel reversed course in the Strait of Malacca, idling for about 12 days before updating its destination to Zhoushan, China. The rerouting coincided with newly announced EU sanctions targeting Rosneft-backed operations, underscoring the immediate market impact of the restrictions.

The EU’s latest measures have complicated Nayara’s export and payment channels, prompting the company to demand prepayments or letters of credit for fuel shipments before loading. These financial constraints, combined with disrupted crude oil supply chains, have led Nayara to scale back output at its Vadinar facility. Multiple cargoes have faced delays or have been left stranded as compliance and financing hurdles mount.

Geopolitical and Market Context

This shipment marks the first Indian diesel delivery to China in over four years, following a thaw in bilateral tensions between the two Asian powers. The timing reflects both strategic trade recalibration and opportunistic market positioning amid supply disruptions from sanctioned Russian-linked output. With EU actions further restricting Russia’s global oil reach, Asian markets are adjusting sourcing strategies, potentially increasing intra-Asian trade flows in refined products.

The diversion of Indian diesel to China signals potential long-term shifts in regional fuel trade as sanctions reconfigure traditional supply routes. For China, diversifying diesel sources could mitigate risks from its own geopolitical frictions with major exporters, while for India, the move highlights flexibility in redirecting output when Western markets tighten access. As the EU intensifies measures against Russian-backed entities, such unconventional trade patterns may become more frequent, reshaping the flow of refined petroleum products across Asia.

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Gerik

Economic

Stocks

Sharp Weekly Outflows Led by Foreign ETFs

From August 4 to 8, ETF capital flows investing in Vietnamese equities recorded net outflows exceeding 1,200 billion VND the largest weekly withdrawal since the start of 2025. Twelve of 20 ETFs tracked saw capital reductions, with the Fubon FTSE Vietnam ETF leading the outflow at 771.9 billion VND. This fund has withdrawn a total of 5,700 billion VND year-to-date, despite delivering a 21.6% return in the first half of 2025. Domestic ETFs also saw significant redemptions, with Dragon Capital’s VFM VNDiamond ETF and VFM VN30 ETF shedding 210 billion VND and 182 billion VND respectively, alongside smaller sales from MAFM VN30 ETF.

The top 20 stocks facing the largest ETF net sales last week were dominated by blue-chip names. VHM and VIC from the Vingroup ecosystem led with 120 billion VND and 116 billion VND in outflows, followed by HPG with 97 billion VND. Other notable stocks affected included MSN, VCB, and SSI. This pattern underscores that ETF rebalancing has a direct and concentrated effect on large-cap, high-liquidity counters, which are often key constituents in index-based funds.

Contrasting Foreign Selling with Domestic Buying

While foreign ETF flows have been negative, domestic investors have actively absorbed the selling pressure. This absorption has allowed the VN-Index not only to hold but also to break above the 1,600-point milestone. The divergence suggests that foreign profit-taking and tactical reallocations are more of a short-term portfolio strategy than a structural withdrawal from the Vietnamese market.

Industry experts note that the recent wave of foreign selling is occurring in parallel with global capital rotation. As global funds reduce exposure to developed markets such as the U.S., there is increasing allocation toward emerging markets including China, Taiwan, India, and Southeast Asia. Vietnam stands to benefit from this shift, especially if FTSE Russell upgrades its classification to Emerging Market status, which could attract an estimated 2–3 billion USD in additional foreign capital.

Vietnam’s economic recovery phase, combined with government initiatives in technology, private sector development, and double-digit growth targets, creates a supportive environment for equity market expansion. The structural reforms in progress not only position Vietnam as an attractive destination for long-term foreign investment but also underpin domestic confidence in absorbing short-term volatility from ETF outflows.

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Gerik

Economic

Wealth Flight and the Fiscal Challenge

The UK’s public finances are under acute pressure, with up to £50bn needed to stabilise the fiscal outlook. Simultaneously, the number of high-net-worth individuals relocating abroad is rising sharply, with destinations such as the UAE drawing British and foreign entrepreneurs alike. Recent data shows between 3,800 and 4,400 company directors departed in the past year, many before the tax year ended, removing significant income from the UK tax base. Under the current residence-based system, once individuals leave, their personal UK tax liability typically ceases fueling debate over whether a citizenship-based system could preserve revenue from this mobile group.

The United States taxes citizens and long-term green card holders on worldwide income regardless of residence, making it one of only two countries alongside Eritrea to do so. This framework ensures that moving abroad does not free individuals from U.S. tax reporting obligations, and in some cases tax liabilities, unless citizenship is formally renounced. Historical origins trace back to the Civil War, when the policy was introduced to ensure citizens contributed financially during wartime. In practice, U.S. expats in higher-tax jurisdictions often owe little or no additional tax due to double taxation treaties, but they must still navigate complex annual filings, often at personal cost.

Potential Benefits and Risks for the UK

Applying such a system in Britain could, in theory, make tax-motivated relocation less attractive, as wealthy individuals would need to renounce citizenship entirely to avoid obligations. Economists suggest this might slow outflows, particularly if paired with an exit tax similar to those in Canada or Australia. However, the policy risks a strong counter-reaction: affluent individuals might pre-emptively renounce citizenship, severing economic ties more completely than mere relocation would. This outcome could reduce inward investment and deter skilled migrants, undermining broader economic goals.

The compliance burden of managing up to five million British citizens abroad would be immense. HMRC already faces service delivery challenges, and enforcing annual filings for people with minimal UK ties would stretch resources. The measure would capture retirees in Spain, students in Australia, and temporary workers abroad, creating widespread administrative complexity and political backlash. Critics argue it would be “a sledgehammer to crack a nut,” with the costs and bureaucracy outweighing potential gains.

Exit Charges as a Middle Ground

Some policymakers favour targeted exit charges, which would apply when individuals change their tax residence. While less intrusive than citizenship-based taxation, experts caution this could send an unwelcoming message to global talent and entrepreneurs, signalling that leaving the UK carries penalties. Such measures could also encourage earlier departures, accelerating the very outflow they are meant to slow.

Ultimately, even if aimed at the wealthy, significant fiscal consolidation is unlikely to be achieved without affecting middle-income earners. Political and practical constraints mean that any citizenship-based system would be difficult to implement without unintended economic consequences. For now, the debate underscores the tension between retaining high-value taxpayers, attracting global talent, and balancing fairness with fiscal necessity. The U.S. model, despite its longevity, may owe more to historical accident than to modern policy wisdom making it a risky blueprint for Britain’s current challenges.

Source: The Telegraph

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IC Markets

Commodity

Forex

Economic

What happened in the U.S session?

The U.S. session overnight was dominated by the CPI release and tariff truce headlines. Equities and crypto rallied, bonds steepened, the dollar weakened, and commodities saw mixed performance as traders positioned for Federal Reserve rate cuts and fewer trade tensions. The Consumer Price Index (CPI) for July landed almost exactly in line with expectations, showing a month-over-month inflation rise of 0.2% and year-over-year at 2.7%. Core CPI (excludes food/energy) came in at 0.3% MoM and 3.1% YoY, a modest uptick from June.What does it mean for the Asia sessions?Asian traders should pay particular attention to Australia’s wage figures for central bank guidance and China’s loan data/policy announcements for clues about economic direction and stimulus effectiveness. The Wage Price Index (WPI) reports are closely watched as they influence inflation expectations and the Reserve Bank of Australia’s (RBA) rate decisions. This quarter’s expected softening in wage growth could reduce urgency for further rate hikes and impact the Australian dollar.

The Dollar Index (DXY)

The US Dollar resumed its decline after two consecutive days of gains. This shift follows investor reactions to the latest Consumer Price Index (CPI) readings, increasing speculation over two Federal Reserve interest rate cuts expected later in the year. Core CPI rose 0.3% month-over-month, pushing the annual rate to 3.1% (up from 2.9%). The headline inflation rate was 2.7% year-over-year, matching expectations. Investors are closely watching whether elevated inflation persists, particularly as softer July payroll data and reports of rising prices have sparked renewed stagflation concerns.Central Bank Notes:

● The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25% to 4.50% at its meeting on July 29–30, 2025, keeping policy unchanged for the fifth consecutive meeting.

● The Committee reiterated its objective of achieving maximum employment and inflation at the rate of 2% over the longer run. While uncertainty around the economic outlook has diminished since earlier in the year, the Committee notes that challenges remain and continued vigilance is warranted.

● Policymakers remain highly attentive to risks on both sides of their dual mandate. The unemployment rate remains low, near 4.2%–4.5%, and labor market conditions are described as solid. However, inflation is still somewhat elevated, with the PCE price index at 2.6% and core inflation forecast at 3.1% for year-end 2025, up from earlier projections; tariff-related pressures are cited as a contributing factor.

● The Committee acknowledged that recent economic activity has expanded at a solid pace, with second-quarter annualized growth estimates near 2.4%. However, GDP growth for 2025 has been revised downward to 1.4% (from 1.7% projected in March), reflecting expectations of a slowdown in the coming quarters.

● In the revised Summary of Economic Projections, the unemployment rate is expected to average 4.5% in 2025, and headline PCE inflation is forecast at 3.0% for the year, with core PCE at 3.1%. Policymakers continue to anticipate that inflation will moderate gradually, with ongoing risks from tariffs and global conditions.

● The Committee reaffirmed its data-dependent and risk-aware approach to future policy decisions. Officials stated they are prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede progress toward the Fed’s goals.

● As previously outlined, the Committee continues the measured run-off of its securities holdings. The pace of balance sheet reduction, which slowed since April (monthly redemption cap on Treasury securities reduced from $25B to $5B, while holding agency MBS cap steady at $35B), was left unchanged this month to support orderly market functioning and financial conditions.

● The next meeting is scheduled for 16 to 17 September 2025.

Next 24 Hours Bias

Medium Bearish

Gold (XAU)

Gold prices today are consolidating after last week’s spike, with trade and tariff news driving volatility. The short-term trend remains bearish as safe-haven flows retreat, and both technical and forecast indicators suggest prices may soften further absent renewed geopolitical tension or central bank buying. Gold prices have been fluctuating between $3,341 and $3,402 per ounce, with recent trades generally weaker following Monday and Tuesday’s dollar rally. On August 12, spot gold was trading near $3,345, down 1.53% for the day.Next 24 Hours Bias

Medium Bullish

The Australian Dollar (AUD)

The AUD remains weak and volatile, pressured by softer economic data and interest rate cuts. While some short-term rebound is possible, strong resistance at $0.66 makes bullish scenarios difficult without a substantial shift in economic fundamentals or improved global risk sentiment. Analysts expect further gradual AUD depreciation unless there’s a marked improvement in productivity or global trade dynamics. On August 12, the RBA lowered its official cash rate by 25 basis points to 3.60%, the third cut of the year. The central bank cited easing inflation and a softening labor market, projecting inflation to move closer to its 2%-3% target range.

Central Bank Notes:

● The RBA held its cash rate steady at 3.85% at the July meeting on 8 July 2025, following a 25bps reduction in May and in line with widespread market expectations after recent data showed inflation tracking within the target band.

● Inflation continues to ease from its peak, with higher interest rates helping to rebalance demand and supply across the Australian economy. Data for the June quarter signaled ongoing progress, though underlying pressures persist in certain sectors.

● Trimmed mean inflation for the June quarter likely remained near 2.9% and headline CPI around 2.4%, both within the RBA’s 2–3% target range. The Board noted further evidence of inflation convergence, but flagged that not all price categories are moving in tandem.

● Financial markets have shown increased volatility in the wake of global tariff and trade policy developments—especially as a result of recent U.S. and EU announcements. This has pushed asset prices higher but contributed to an uncertain outlook for domestic growth and employment.

● Private domestic demand showed a tentative recovery. Real household incomes improved and signs of easing household financial stress emerged, but some business sectors continued to face subdued demand, limiting their ability to pass on cost increases.

● Labour market conditions remained tight overall. Employment continued to expand, with low rates of underutilization. Business surveys suggest labour availability remains a constraint, though there are signs of a gradual easing compared to earlier in 2025.

● Underlying wage growth softened modestly, though unit labour cost growth remains elevated due to below-trend productivity gains. The Board remains attentive to developments in wage and productivity dynamics as cost pressures continue to evolve.

● Uncertainties persist for both domestic activity and inflation. Consumption growth has risen, but more slowly than anticipated three months ago, with global and domestic factors both contributing to the cautious outlook.

● There remains a risk that household spending picks up more slowly than forecast, which could result in ongoing subdued aggregate demand and a sharper deterioration in employment conditions.

● Given that inflation is expected to remain around the target band, the Board judged that it was appropriate to keep policy settings unchanged in July, maintaining a position that is still mildly restrictive.

● The Board continues to monitor all incoming data and assesses risks carefully, with a focus on global trends, domestic demand indicators, inflation outcomes, and the labour market outlook.

● The RBA remains committed to its mandate of price stability and full employment and stands ready to adjust policy as needed to achieve these objectives.

● The next meeting is on 11 to 12 August 2025.Next 24 Hours Bias

Weak Bullish

NZD

The New Zealand Dollar is trading steadily ahead of anticipated policy action from the RBNZ. Inflation expectations are slightly lower, and a rate cut is considered likely by observers. The NZD is fluctuating in a narrow range amid market caution, with technical and global factors like US Dollar trends and commodity prices impacting short-term movement.Q3 inflation expectations for New Zealand businesses have ticked lower—two-year expectations fell slightly to 2.28% (from 2.29% in Q2). One-year expectations dipped to 2.37% (from 2.41%). Both figures are well within the Reserve Bank of New Zealand (RBNZ) target band of 1%-3%

Central Bank Notes:

● The Monetary Policy Committee (MPC) agreed to hold the Official Cash Rate (OCR) at 3.25% on 9 July, marking the first pause following six consecutive rate cuts.

● The MPC cited heightened uncertainty and near-term inflation risks as reasons to wait until August for further action.

● Although the annual consumer price index inflation increased to 2.5% in the first quarter of 2025, it remained within the MPC’s target range of 1 to 3%, noting that the outlook for medium-term inflation pressures has evolved broadly in line with the May MPS projections.

● While it is expected to be near the upper end of the band in the second and third quarters of this year, easing core inflation and spare capacity in the economy should help return it toward the 2% midpoint over time.

● The MPC noted that, despite global factors, domestic financial conditions are evolving broadly as expected, as mortgage and deposit interest rates have continued to decline, reflecting a lower OCR, strong bank liquidity, and soft credit growth.

● In aggregate, GDP growth over the December and March quarters was stronger than expected, reflecting a pickup in household consumption and business investment. However, higher-frequency indicators suggest weaker-than-expected growth in April and May.

● Large economic policy shifts overseas and concerns about sovereign risk could result in additional financial market volatility and increased bond yields, while prolonged economic uncertainty might induce further precautionary behaviour by households and firms, slowing the domestic economic recovery.

● Subject to medium-term inflation pressures continuing to ease in line with the Committee’s central projections, the Committee expects to lower the OCR further, broadly consistent with the projection outlined in May.

● The next meeting is on 20 August 2025.

Next 24 Hours Bias

Weak Bearish

The Japanese Yen (JPY)

What can we expect from JPY today?The Japanese yen begins August 13 under moderate pressure, with exchange rates stable but at the lower end of their recent range. Political uncertainty and bond market jitters driven by a major government note issuance and speculation over leadership are the main storylines, while economic data releases such as the PPI and GDP later in the week could give further direction to the yen’s next moves.Japan’s Ministry of Finance is set to issue ¥2.40 trillion in 5-year government notes today, a move that comes amid heightened political uncertainty—including speculation over Prime Minister Shigeru Ishiba’s potential resignation. Investors expect this issuance to impact yields and signal the country’s fiscal outlook, especially as recent wage growth has fueled speculation of a possible Bank of Japan rate hike soon.

Central Bank Notes:

● The Policy Board of the Bank of Japan decided on 31 July, by a unanimous vote, to set the following guidelines for money market operations for the inter-meeting period:

● The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5%.

● The BOJ will maintain its gradual reduction of monthly outright purchases of Japanese Government Bonds (JGBs). The scheduled amount of long-term government bond purchases will, in principle, continue to decrease by about ¥400 billion each quarter from January to March 2026, and by about ¥200 billion each quarter from April to June 2026 onward, targeting a purchase level near ¥2 trillion in January to March 2027.

● Japan’s economy is experiencing a moderate recovery overall, though some sectors remain sluggish. Overseas economies are generally growing moderately, but recent trade policies in major economies have introduced pockets of weakness. Exports and industrial production in Japan are essentially flat, with any uptick largely driven by front-loaded demand ahead of U.S. tariff increases.

● On the price front, the year-on-year rate of change in consumer prices (excluding fresh food) remains in the mid-3% range. This reflects continued wage pass-through, previous import cost surges, and further increases in food prices, particularly rice. Expectations for future inflation have begun to rise moderately.

● The effects of the earlier import price and food cost increases are expected to fade during the outlook period. There may be a temporary stagnation in core inflation as overall growth momentum softens.

● Looking forward, the economy is likely to see a slower growth pace in the near term as overseas economies feel the pinch of ongoing global trade policies, putting downward pressure on Japanese corporate profits. Accommodative financial conditions are expected to buffer these headwinds somewhat. In the medium term, as global growth recovers, Japan’s growth rate is also expected to improve.

● With renewed economic expansion, intensifying labor shortages, and a steady rise in medium- to long-term expected inflation rates, core inflation is projected to gradually pick up. By the latter half of the BOJ’s projection period, inflation is forecast to move in line with the 2% price stability target.

● There are multiple risks to the outlook, with especially elevated uncertainty regarding the future path of global trade policies and overseas price trends. The BOJ will continue to closely monitor their impact on financial and foreign exchange markets, as well as on Japan’s economy and inflation.

● The next meeting is scheduled for 17 to 18 September 2025.

Next 24 Hours BiasMedium Bearish

Oil

EIA Crude Oil Inventories (2:30 pm GMT)What can we expect from Oil today?Oil prices continue to drift lower amid signs of oversupply, subdued demand forecasts, and significant economic data awaited from EIA and IEA reports today. Key geopolitical events and OPEC+ production realities are adding volatility and uncertainty to near-term pricing, while traders watch inventory trends and U.S.–Russia negotiations for further market direction. Oil prices are on a downward trajectory, with Brent crude trading below $66/bbl in recent sessions and West Texas Intermediate (WTI) around $63/bbl. The market is experiencing a period of minimal upside, tempered by U.S.-China tariff uncertainties and potential diplomatic breakthroughs on the Ukraine conflict.Next 24 Hours Bias

Strong Bearish

Source: IC Markets

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Economic

Stocks

Equities Surge on Optimism Over Policy Easing

Asian stock markets extended their rally on Wednesday, with Japan’s Nikkei breaching the 43,000 mark for the first time and closing 1.4% higher. The MSCI All Country World Index rose for a second consecutive day to a record 948.54, mirroring Wall Street’s performance where both the S&P 500 and Nasdaq set new highs. Investor enthusiasm was amplified by growing confidence now at 94% according to the CME FedWatch tool that the Federal Reserve will lower interest rates in September. This surge in risk-taking reflects a direct link between softer inflation readings and heightened expectations for monetary easing, which in turn drives equity valuations higher.

The U.S. consumer price index rose 2.7% in July year-on-year, slightly below the 2.8% market forecast, indicating that President Donald Trump’s tariff measures have yet to significantly pass through to consumer prices. The moderation in inflation comes on the heels of a weaker-than-expected jobs report earlier in the month, reinforcing the perception that the Fed has scope to support growth without risking runaway inflation. This combination of softer inflation and labour market caution has tilted market sentiment decisively toward a near-term rate cut, with traders increasing their probability estimates sharply over the past month.

Japanese Market Gains Supported by Domestic Data

Japanese equities were further buoyed by improved business sentiment among manufacturers, as reported by the Reuters Tankan poll, which recorded a second month of improvement following a trade agreement with the United States. Wholesale inflation in Japan slowed in July, aligning with the Bank of Japan’s assessment that raw material cost pressures are fading. This easing in input costs supports corporate margins and adds to equity market optimism, though the persistence of certain sectoral price pressures could still influence BOJ policy discussions.

Political factors in the United States also played a role in market dynamics. Trump signed an executive order pausing steep tariffs on Chinese imports for 90 days, a move that reduces near-term trade friction and supports market sentiment. However, investor confidence in U.S. data transparency was tested by comments from E.J. Antoni, Trump’s nominee to lead the Bureau of Labor Statistics, suggesting a potential suspension of monthly employment reports remarks later countered by the White House, which stated the reports would continue. Speculation over such a suspension weighed on the dollar by raising concerns among foreign investors, potentially influencing hedging strategies for U.S. assets.

Currency and Commodity Movements Reflect Defensive Dollar

The dollar index fell for a second straight day, with the greenback little changed at 147.84 yen and the euro edging up to 1.1684 after a sharp gain in the previous session. The weaker dollar was influenced both by rate cut expectations and uncertainty surrounding U.S. economic data governance. In commodities, U.S. crude dipped marginally to 63.14 dollars a barrel, while spot gold held steady at 3,348.10 dollars an ounce. Cryptocurrency markets also saw notable activity, with ether touching 4,634.70 dollars the highest since December 2021 before pulling back slightly.

The alignment of softer inflation, growing rate cut expectations, and easing trade tensions is fostering an environment of robust risk appetite, particularly in equity markets. However, political uncertainty around U.S. economic data releases and potential policy shifts could reintroduce volatility. In the near term, global markets appear set to maintain their upward momentum, supported by accommodative policy signals from major central banks and steady capital inflows into risk assets.

Source: Reuters

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ING

Economic

Commodity

Political

Energy – OPEC sees tighter oil market in 2026

Oil prices continued to move lower yesterday, with the market focused on Friday’s Trump-Putin meeting. The outcome could remove some of the sanction risk hanging over the market. The drop in oil comes despite US consumer price index data yesterday buttressing the view that the Federal Reserve will likely cut interest rates at its September meeting.

In its monthly oil market report, OPEC made no changes to its 2025 demand and non-OPEC+ supply numbers. The group did, however, make some revisions to its 2026 forecasts. OPEC increased its oil demand growth forecasts for 2026 by 100k b/d to 1.38m b/d, while non-OPEC+ supply growth was cut by 100k b/d to 630k b/d. This leaves the market tighter than previously forecast. The release also shows that OPEC increased supply by 263k b/d month on month in July to 27.54m b/d. Saudi Arabia and the UAE drove most of the increase. The International Energy Agency (IEA) will release its monthly oil market report later today.

The Energy Information Administration (EIA), in its latest Short-Term Energy Outlook, slightly increased its US crude oil production estimate for 2025 from 13.37m b/d to 13.41m b/d. This leaves year-on-year supply growth at 200k b/d. However, the agency now expects US oil production will fall in 2026 by 130k b/d YoY to 13.28m b/d. Downside risks to supply aren’t too surprising, given the significant decline in US drilling activity in recent months. For dry natural gas output, the EIA expects supply in 2025 to grow by 3.2 bcf/day to 106.4 bcf/day, while 2026 natural gas output is expected to fall by 0.3 bcf/day YoY.

Finally, American Petroleum Institute (API) inventory numbers were fairly neutral overnight. US crude oil inventories increased by 1.5m barrels over the last week. For refined products, gasoline stocks fell by 1.8m barrels, while distillate inventories increased by 300k barrels. The more widely followed EIA weekly inventory report will be released later today.

Agriculture– WASDE bearish for corn, bullish for soybeans

The USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) report was bearish for corn and bullish for soybeans. The agency revised up its 2025/26 US corn production estimates by 1,037m bushels to a record 16.7bn bushels amid larger area and higher yields. The market had expected a number closer to 16bn bushels. Higher output means US ending stocks estimates were increased by 457m bushels to 2.1bn bushels, the highest since 2018/19. The market was expecting a number closer to 1.9bn bushels. For the global corn balance, 2025/26 ending stocks were increased from 272.1mt to 282.5mt, largely due to stronger US supply.

For the US soybean market, the USDA slashed its 2025/26 production estimate from 4,335m bushels to 4,292m bushels due to lower acreage. Stronger yield estimates were unable to offset the lower acreage. The market had expected output of around 4,374m bushels. As a result, the USDA reduced its US ending stock estimate from 310m bushels to 290m bushels, lower than the 358m bushels the market anticipated. Globally, soybean production estimates fell from 427.7mt to 426.4mt for 2025/26 primarily due to the lower supplies from the US. The USDA also cut its 2025/26 global ending stocks estimate from 126.1mt to 124.9mt.

Finally, for wheat, the USDA reduced its US ending stocks estimate for 2025/26 from 890m bushels to 869m bushels amid stronger export and domestic demand. The market was expecting a number closer to 882m bushels. The USDA also lowered its 2025/26 global wheat ending stocks estimate by 1.4mt to 260.1mt, the lowest level since 2015/16. The reduction was largely in line with market expectations.

Source: ING

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Economic

Easing Wholesale Inflation Signals Cooling Cost Pressures

Japan’s corporate goods price index (CGPI) rose 2.6% year-on-year in July, a slowdown from June’s 2.9% increase and the fourth straight month of deceleration. This figure was slightly above the median market forecast of 2.5%, reflecting a gradual reduction in the upward pressure from raw material costs. The yen-based import price index dropped 10.4% in July, following a 12.2% decline in June, showing that lower import costs particularly for key industrial inputs are helping ease overall wholesale price growth. This trend reinforces the Bank of Japan’s view that much of the earlier inflation surge was tied to external cost shocks, which are now subsiding.

While prices for chemicals and steel products fell, wholesale prices for food and beverages rose 4.2% compared with a year earlier. This divergence suggests that although global commodity pressures are easing, domestic sectors tied to agriculture and food supply chains remain under upward price pressure. The persistence of price increases in essential goods like food is significant because it can sustain broader inflation expectations and influence wage negotiations, both of which have implications for monetary policy.

Policy Implications for the Bank of Japan

The BOJ ended its decade-long ultra-loose monetary policy last year and raised its policy rate to 0.5% in January, signalling confidence that Japan was close to achieving a sustainable 2% inflation target. Core consumer inflation has remained above this threshold for over three years, but Governor Kazuo Ueda has stressed caution in further tightening, arguing that much of the price growth stems from temporary cost factors. The July data underscores this duality: headline wholesale inflation is easing, supporting a patient stance, while sector-specific increases in food prices could justify a more proactive approach if they start to influence overall inflation persistence.

Market participants continue to weigh these conflicting signals. The cooling in aggregate wholesale prices points toward a moderation in inflationary momentum, which could reduce immediate pressure for rate hikes. However, the steady climb in food-related wholesale prices keeps alive the possibility that the BOJ may act again, particularly if these increases feed into consumer prices and wage demands. In this context, the July CGPI report provides both reassurance of easing cost pressures and a cautionary reminder that inflation risks remain in key sectors.