Crude oil and USDJPY whiplash. Tesla fans ignore shaky autonomous driving debut.
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All information provided is for educational and entertainment purposes only. All right, it is Tuesday, 24th of June, 2025, and it is happy days over at Hanson. We got all risk-on cylinders firing. We have geopolitical tensions easing. We'll get to that or why in a second. Crude oil prices crushed. Fed officials dovish.

and risk on. So a very strong scenario here for the equity market. And we're seeing the dollar lower as well, which helps risk sentiment globally. Let's go through what happened and why crude oil prices are so much lower. I mean, it's pretty much just screaming across all the headlines, but take us through the step-by-step what happened.

Well, what in a nutshell happened was basically that the $10 plus risk premium that has been built into the price now for the past almost two weeks basically disappeared in a few hours.

And we highlighted that in our podcast yesterday simply that this risk premium needed to be fed constant bad news or worrying news in order to be maintained because the overall fundamentals in the market does not point to a plus 80 price but a sub 70 price. And

The two events that really unfolded was, I think, the most important one. It's probably not the one that's on the headlines today because it's all about Trump. But the most important one was really Iran's well-flagged attack on the U.S. military base in Qatar. It was coordinated with officials in Qatar. The U.S. was warned in advance. Missiles were shot down.

Iran basically had to show some kind of retaliation against the attack from the U.S. on Sunday, which, by the way, apparently, according to a survey and investigations, did not hit the nuclear sites hit around it, but the reactors were not hit, apparently. So, again, potentially that was just also a signal from the U.S. to tell the Iranians what they can do if they want to. So, let's see. But the market basically took the Iranian…

move as a sign that they want to de-escalate. And the market took that at face value straight away. Markets started to sell off, the oil market did. And then a few hours later, Trump announced that Iran and Israel has agreed to a ceasefire. And that did the rest of the job. So today we are...

From above 80 yesterday, we're now below 70. We have wiped out that risk premium. We're back to the range sub 68.5 where we traded up until recently. And this is probably where we're now going to settle in. And I think, again...

If you want to speculate in renewed risk, having just seen a $13 tumble, you are probably going to be a little bit more hesitant in getting involved on the long side. And as we also highlighted yesterday, a lot of the reason buying was short, basically it's been getting squeezed out, that position had been reduced to a minimum as of last Tuesday, especially in the Brent market. So there was not really...

Any further upside had to come from fresh lungs coming into the market. And do you really want to buy a 10% premium that could evaporate in an instant? And today we see the result of that. All right. And as well, Tesla could not have timed its autonomous driving event or rollout any better.

with a handful of cars. I think it was 10 cars, and this is only by invitation with a driver or a minder, I guess in case something goes wrong there. But that launch, seeing an unbelievable rally in Tesla share prices, I think it was 8.8% or something like that on the day.

uh, with this launch. And that's despite the fact that, uh, I saw a couple of videos that looked downright, uh, shambolic, uh, on a couple of the, uh, decision points the car was making during the day, uh, freaking out when it's supposed to be making a left turn and then deciding, oops, maybe I shouldn't make the left turn and then driving in and basically what would be an opposing traffic lane. There was no car there, um, for, uh, I guess the better part of 20, 30 meters before it, uh,

Before it's in a lane that's actually a lane that's allowed to be in this kind of stuff. But it does believe it does look like the Kool-Aid drinkers are drinking some some good stuff yesterday. And just for perspective, I think it's worth pointing out as well. I mean, these Teslas operate as far as I know, they're still operating only on the camera technology.

And you have the likes of, of course, Waymo. They've been out for ages with their autonomous driving. But I think they're timing it as well quite well with some pretty recent strong announcements from Volkswagen, which has a really incredibly outfitted ID.Buzz. So that's sort of the new, what's that thing called? The old VW bus, the new version of the EV version of this updated VW bus, ID.Buzz with two Zs.

With 13 cameras, 9 lidars, so 9 lidars are actually for feeling out the area around the car in a totally different sense than a camera, not using visuals at all, and 5 radars. So a very specially outfitted VW ID.Buzz. I think I would feel a bit more trusting with that type of equipment, assuming they have all the kinks and the software worked out as well.

and it has apparently redundant systems on braking and steering and things like that as well. So I just wonder, is there going to be this amazing advantage, even if Tesla can get this thing operating relative to some of the competition?

That was, of course, the biggest single stock story of the day. Risk on, risk on, risk on. And feeding that is the Fed's Bowman out yesterday. So she is the vice chair, of course, on the Board of Governors at the Fed, indicating that she is open to a July rate cut. I don't know if she's open to a July rate cut as much as she is maybe bidding for a Fed chair position or nomination, because somehow I suspect that Trump will not be nominating Powell once again.

As he's coming up with daily new epithets for what he's calling, what is he calling him, too late pal lately. But she did indicate that openness, assuming inflation remains subdued, was her wording, or if the labor market weakens. And this really just set off a tremendous rally or rally.

rally in Eurodollar, but sell-off in the U.S. dollar yesterday, clearly the spark for that. I think, though, the clearing of this geopolitical premium was a really key component there. I think the dollar kind of wanted to sell off anyway, and a lot of decision-makers in the markets were just being put on pause by the

by the nature of this disruption around Israel conflict and the U.S. getting involved, et cetera. Now that's kind of cleared, at least for now, we can get back to business. And then, of course, it helps out. You're getting a strong signal from the Fed. And then in the case of dollar-yen, oh, my goodness, what a turnaround. Yesterday we had that yen sell-off because of the JGB issuance schedule changes.

of issuance because they're fearing that the market can't absorb it. The market did absorb a 20-year JGB auction yesterday, yes, at the reduced level, but it was an orderly auction if with subdued bid-to-cover metrics.

So that proceeded OK overnight. But then, of course, the dovish Fed and those lower oil prices, which means that that's less of an inflationary threat into Japan, makes their negative real rates outlook look less bad because you're not going to get that feeding into even worse Japanese inflation. So just a very sharp turnaround in dollar-yen, even sharper than the price action we're seeing in euro-dollar, which has tried at those 116-plus highs.

Yeah, and staying with the dollar, John, just highlighting as well another commodity which has been receiving a lot of attention recently, the gold market. We're trading down more than 1% today, and that sell-off probably would have been even worse if we hadn't seen the renewed weakness in the dollar and also the fact that the inflationary pressure from these high energy prices is now going to fade again, again leaving perhaps room for that geostationary

July rate cut. So the gold market is still taking it easy. It's trading sideways. It's really lacking a spark for a renewed push. And until we see that, then the Seamfly investors are mostly a little bit on the defensive side there. Yeah, I mean, clearly there's been a huge rally in gold.

And I just wonder, I mean, it used to be pretty clear what you'd look at to sort of understand where should the gold price be or what are the themes, what are the supporting indicators? And it feels like to me we're a little bit adrift with sort of measuring this gold. Maybe it's certainly some sort of

It's to some degree, at least, a fear. If Trump goes completely crazy again on the tariffs or we get massive retaliation and we're showing signs of a massive global trade war breaking out, we still have no idea what these trade negotiations are going to result in. We have current tariffs ongoing, but it just feels to me like it's a bit day-to-day hard to find the key thing to track with gold. Absolutely, John. And I think the only thing that –

because historically, normally you would use your algos, you would put up your, set up your algos systems to, with gold to track interest rate movements and also the dollar. The dollar clearly still has an impact, dollar weakness, gold strength, we've seen that this year. But the interest rate has really been the,

tricky one. There's been a dislocation for almost a number of years now and I think the two things the market can't really quantify and add an algo to is the central bank demand which we quite often only get with quite a bit of delay but it's there and it's helping underpin prices and then the risk, the

the hedging activity from high net worth individuals and others basically worrying a little bit about the debt situation that they're also underpinning prices by bidding with focus on that. And these cannot really be measured and that's why sometimes it's difficult to gauge what's actually the actual drive of the market. Yeah, great points.

And I don't know if it'll feed into the gold price. Certainly there's a little bit of implications for geopolitics. Once again, a little bit more back to these long-term alliances, traditional alliances, security and otherwise. But we have NATO summit today and tomorrow. And the big noise there is that Spain's Prime Minister Sanchez is not willing to commit to this 5% GDP goal, of GDP goal on spending on military assets.

So, you know, how will that go down with the, um, uh, with, uh, of course, the president Trump himself, because it's being sort of pitched as the, the, uh, the NATO summit where it's about pleasing Trump just to sort of keep this, uh, uh, keep NATO, uh, steady as she goes. And then you see some headlines about the U S uh, Japan, um,

The negotiation is not going smoothly. I don't know the various sources on this, but the noise being that Japan is not really interested in committing to these specific GDP levels in terms of military spending, but will use its own priorities. I don't know how that will go down with the U.S. negotiators, et cetera. But just something to watch here as we're still wondering what the final shape of these trade deals would be.

And then also looking forward to today, we have Fed Chair Powell in the first of two days of testimony, this one before a House Financial Services Committee today. It's going to be a bit of political theater to say the least, but could the pressure be so withering on Trump that he's – or Trump – on Powell that he is sort of forced to resign?

I don't know, loosen his commitment to the patients or indicate a willingness to, if the data is sufficiently bad, that the Fed will, of course, be reactive, et cetera, et cetera. I do not know. I think he's pretty insistent for now about the independence of the Fed. But Trump is basically exhorting the troops from the sideline to saying, I hope he's really in for a grilling today at that testimony.

Interesting one to watch there. And then just very briefly on the rest of FX. So with a strong risk sentiment, you're seeing an attempt to get the Swedish krona back on the bid after it suffered a big setback on the Riksbank dovishness.

I think Europe in a good mood today. And of course, I think the euro could also be sensitive to NATO situation. If that's looking wobbly, I think it actually encourages euro strength because of the implications for spending and investment in building up Europe. And then knocking on its knees really for the reason that has been no big surprise, crude oil sell-off.

Although if we have a stronger risk sentiment, I think there's a ceiling pretty quickly on Euronauti if global markets remain in good mood. And then elsewhere, we saw Kiwi really coming back in an amazing fashion, a very significant trend.

candlestick on the Kiwi dollar chart. So New Zealand dollar versus US dollar chart and even coming back more strongly than the Aussie. And just curious with this gold weakness here, just watching if this the Swiss franc starts to wobble a bit. We have of course the S&B doing what it can with rate policy and even leaning on currency intervention as a policy tool. But we've seen a spectacular retreat just intraday, just one day thing here in Swiss franc versus the Japanese yen.

Just after it reached, I suppose it's an all-time high, certainly an all-time high in recent sense. And Euro-Swiss just continues to tease this sort of 94-25 area as the key resistance. So just wondering if there's a chance that there could be some focus on consolidation and even Swiss franc weakness.

All right, I'm going to call it a day for today. It's going to be an interesting day ahead. We've seen a big dollar move. We're seeing risk sentiment really trying to make a comeback here. And interesting to see Fed Chair Powell's testimony, how that shapes up and whether this dollar bear resumes with a vengeance, which is the title of my FX update for today. And I'll provide a link to that FX update in the podcast description. All right, that's a wrap for today. Thanks for joining and stay careful out there. We'll be back soon with the next Saxo Market Call.