Volatility spike in the 2nd part of the day 💡

🚨NATGAS widens declines to 5%, US100 caps early gains

The second part of the session in the markets brings a jump in volatility on many instruments. Natural gas-based contracts extend early declines to 5%, while Wall Street indices reverse much of the euphoric gains from the session's opening. The market is waiting with uncertainty for the CPI report, which will decide whether the US Federal Reserve will decide to cut interest rates quickly this year or whether its rhetoric will lean more toward slow cuts with a particular analysis of the path of inflation.  

Since last week, the implied path of interest rates in the US has changed quite a bit. Namely, one rate cut of 25 basis points in six months has been completely erased, which also almost ruled out the chance of a 50-point cut in September. Source: Bloomberg Financial LP

Gas prices are subject to downward pressure today in large part due to the emerging Tropical Cyclone Six in the Gulf of Mexico, which is expected to hit areas of Louisiana late Wednesday afternoon. The cyclone's appearance anywhere in Louisiana would disrupt the loading of LNG tankers closer to the Cameron, Calcasieu Pass or Sabine Pass terminals. According to analysts at Energy Aspects, LNG feedstock gas will be a key pillar of structural gas demand this fall, as cooling demand in the US slows. “Sabine Pass and Cameron are the two largest export terminals in the U.S., and even a brief shutdown of operations at either terminal would increase inventories in an already congested storage situation in the south-central part of the country,” - The analysts added.

US100 is reducing early gains and is trading in close proximity to a key support zone set by the 200-day EMA (gold curve on the chart). Source: xStation

Natgas extends declines to over 5%. Source: xStation