Bessent’s Iran offensive, Gold’s three-month high and Aussie CPI ahead

Preview: Markets tread water ahead of Nvidia and Jackson Hole as Bessent launches his Iran sanctions campaign and gold hits a fresh high.

Market scoreboard this morning

In equities, US stock indices finished Monday largely in the red, with the S&P 500 and Nasdaq 100 down 0.3% and 1%, respectively. Markets are clearly waiting to see how Nvidia’s earnings play out and, of course, Friday’s speech by Fed Chairman Kevin Warsh at Jackson Hole.

US Treasury yields bull-flattened, which was partly driven by reports that the Treasury may draw on its cash account to fund further bond buybacks. In FX, the USD was up yesterday and has established modest support ahead of the European cash open.

In the commodities complex, oil benchmarks were on the ropes yesterday, with US Treasury Secretary Scott Bessent’s speech adding little volatility. Spot gold versus the USD, on the other hand, reached a high of US$4,696 – its highest level since mid-May. This rally is largely underpinned by planned US Treasury bond buybacks and an overall lower USD. 

‘Operation Outcast’

Yesterday, the focus was largely on Bessent. Under President Trump’s direction, Bessent launched ‘Operation Economic Outcast’, described as an ‘economic onslaught’. The objective is to ‘sever’ every economic lifeline until ‘Tehran stands alone’, targeting five sectors: digital assets, technology, gold, aviation, and shipping.

Bessent warned that any country doing business with Tehran would be cut off from the US dollar system. No countries were named, and he neither confirmed nor denied whether China would be in their crosshairs – for context, Beijing imports around 80% of Iran’s exported oil. Bessent also emphasised that no one is above US sanctions and noted that Trump would personally call countries to ensure compliance. 

While I could be wrong, I feel we have seen this movie several times during this 6-month conflict between the US and Iran. The specifics of the sanctions were few and far between, and this could be the Trump administration – despite their hyperbole – effectively running out of runway. 

Until we know the weight behind these sanctions and how they will apply economic pressure on Iran to get it back to the negotiating table, this is far from a ‘D-Day’ scenario; it is more of a ‘warning shot’ to entities doing business with Iran. Furthermore, I am not sure how much effect this will even have on the Iranian regime; Tehran has weathered sanctions for years, and its approach has remained the same. 

Once again, more questions than answers. 

Aussie CPI inflation eyed: Data miss to feed into weaker employment

Overnight, we will see the July Australian CPI print land at 1:30 am GMT. Tomorrow will also welcome the July US PCE price index, and the second estimate for US Q2 26 GDP at 12:30 pm, and, of course, Nvidia will report its Q2 FY27 results after the cash market close. However, for this briefing, I will only preview the Aussie print and then focus on the US data in tomorrow’s report. 

Estimates heading into the release indicate that the YY headline is expected to ease to 3.3% from 3.8% in June (est. range between 3.7% and 3.1%), while the RBA’s preferred inflation gauge – the YY trimmed mean – is forecast to cool to 3.5% from 3.6% (est. range between 3.7% and 3.5%).

Earlier this month, you will recall that the RBA held the cash rate at 4.35% for a second consecutive meeting. The latest bank forecasts showed a downward revision to the cash rate to 4.4%, with the YY trimmed-mean inflation forecast also revised lower to 3.3% by year-end, to 3% by June 2027, and is expected to reach the mid-point of the 2-3% target range by late 2027 or mid-2028. 

Essentially, the latest forecasts signalled to traders that the central bank does not see the need to hike rates to bring inflation down. However, what caught many off guard was that, in her press conference, RBA Governor Michelle Bullock struck a hawkish tone, noting that inflation risks remain to the upside and that a rate hike was discussed at the meeting. This reversed the immediate downside in the AUD.

Earlier this month, the July Australian employment report was released, showing job growth fell by nearly 16,000 (from an upwardly revised 80,000 in June) and the unemployment rate ticked up to 4.5% from 4.4%. On the face of it, this was a poor report, and the AUD sold off as a result. Nevertheless, the drop in employment was largely due to a fall in part-time jobs – full-time employment actually jumped by around 16,000. Layer this in with the 4.5% unemployment reading lining up with the RBA’s end-of-year forecast, and this helps explain the lack of oomph in the immediate move lower and only a modest dovish repricing in cash rate expectations. 

The overall tone remains hawkish heading into tomorrow’s print, reinforced again on 19 August by RBA Deputy Governor Andrew Hauser, who said rates may need to rise again if inflation does not cool and that policy needs to actively suppress demand. Year-end market pricing implies about a 50% chance that the RBA hikes rates. 

If inflation comes in softer than expected, this would – given the recent jobs print – help build the case for the RBA to remain on hold this year. On the back of this, I would expect STIR futures to rise as traders price out tightening bets for September and perhaps even November, and the AUD to take a hit. If CPI surprises to the upside despite a loosening labour market, it would put the RBA in an awkward spot – squeezed between persistent inflation and weakening employment. Although this could see some AUD upside, I feel it could be a tricky one to trade. A broad miss would offer the cleaner read, I believe.