<p>Weekend data out of China’s National Bureau of Statistics, a soft reading for Industrial Profits in July. </p><p>Profits at industrial firms in China for the first seven months of the year (i.e. January – July) fell 1.1% y/y</p><ul><li>this compares with the +1.0% for January – June </li></ul><p>Earlier this month we had the July data for retail sales, industrial output and investment all missing economist estimates. The economy is beset by woes from ongoing Covid disruptions (for example, factory output and activities in major manufacturing hubs like Shenzhen and Tianjin were hit during July as renewed COVID curbs were imposed) and the deepening, contagious, slump in the property sector.Looking ahead, officials in China are working to bolster growth, including:</p><ul><li>People’s Bank of China cuts to both one-year, five-year, and seven-day lending rates</li><li>another 1 trillion yuan of funding, mainly directed at infrastructure spending </li></ul><p>-</p><p>Come Monday morning market openings I suspect the backwash from Powell at Jackson Hole on Friday will overshadow this data. </p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/forexlive-americas-fx-news-wrap-forceful-message-from-powell-sends-dollar-soaring-20220826/“ target=“_blank“ data-article-link=“true“>Forexlive Americas FX news wrap: ‚Forceful‘ message from Powell sends dollar socaring</a></li></ul>

This article was written by Eamonn Sheridan at www.forexlive.com.

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This article was written by Greg Michalowski at www.forexlive.com.

<ul><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/feds-powell-decision-on-sept-hike-will-depend-on-totality-of-data-before-meeting-20220826/“>Fed’s Powell: Restoring price stability requires using our tools forcefully</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/us-june-core-pce-46-vs-47-expected-20220826/“>US June core PCE 4.6% vs. 4.7% expected</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/feds-mester-were-all0in-and-were-going-to-be-resolute-about-getting-inflation-to-goal-20220826/“>Fed’s Mester: We’re all-in and we’re going to be resolute about getting inflation to goal</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/feds-harker-we-need-to-move-methodically-toward-a-clear-restrictive-stance-20220826/“>Fed’s Harker: We need to move methodically toward a clear restrictive stance</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/feds-bullard-were-starting-to-see-some-real-effects-of-rate-hikes-already-20220826/“>Fed’s Bullard: We’re starting to see some real effects of rate hikes already</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/university-of-michigan-sentiment-index-final-for-august-582-versus-551-preliminary-20220826/“>University of Michigan sentiment index (final) for August 58.2 versus 55.1 preliminary</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/dallas-fed-july-trimmed-mean-pce-inflation-34-vs-69-prior-20220826/“>Dallas Fed July trimmed mean PCE inflation +3.4% vs +6.9% prior</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/ecbs-holzmann-75-bps-should-be-part-of-the-debate-in-sept-20220826/“>ECB’s Holzmann: 75 bps should be ‚part of the debate‘ in Sept</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/the-atlantic-hurricane-season-is-off-to-a-slow-start-20220826/“>The Atlantic hurricane season is off to a slow start</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/some-ecb-policymakers-want-to-discuss-a-75-bps-hike-next-month-report-20220826/“>Some ECB policymakers want to discuss a 75 bps hike next month – report</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/us-july-wholesale-inventories-08-vs-18-prior-20220826/“>US July wholesale inventories +0.8% vs +1.8% prior</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/baker-hughes-us-oil-rig-count-4-20220826/“>Baker Hughes US oil rig count +4</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/us-advanced-goods-trade-balance-for-july-8906b-versus-9818-billion-last-month-20220826/“>US advanced goods trade balance for July -$89.06B versus $-98.59 billion last month</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/feds-bostic-restrictive-is-35-375-hopeful-to-get-there-by-year-end-20220826/“>Fed’s Bostic: Restrictive is 3.5-3.75%. Want to get there then hold steady</a></li></ul><p>Markets:</p><ul><li>S&P 500 down 3.4%</li><li>Gold down $21 to $1737</li><li>US 10-year yield up 1 bps to 3.03%</li><li>WTI crude oil up $0.34 to $92.86</li><li>USD leads, NZD lags</li></ul><p>There was a dovish lean in the market before Powell as the PCE inflation report came in soft. That was validated by Bostic as he said it made him lean more slightly towards 50 bps in September.</p><p>However it all came undone with Powell. He delivered a crisp 8-minute speech that included strong language on holding rates higher for longer and taking ‚forceful‘ action, which is a tool he hasn’t used before. In terms of clear signals, he said Sept was still undecided as they wait for data.</p><p>There was no big red flag in the speech that argued for buying the dollar and selling stocks. Instead it was the collective tone of the speech along with it’s brevity. It alluded to a clear parallel with the 1970s and the importance of keeping rates higher for longer rather than easing at the first sign of economic weakness or a retreat in inflation. Powell also emphasized that the Fed was prepared to tolerate economic pain to achieve its objectives.</p><p>I’d argue the Fed doesn’t have credibility on staying hawkish if the economy turns but the market certainly argued against that today. The initial reaction snowballed and the dollar bid hardly gave up a pip with virtually everything finishing at the extremes of the day.</p><p>The moves argue that equities were looking for some kind of dovish hint from Powell but couldn’t find it. Curiously though, the rates market didn’t move much on Powell. In bonds, the flight to safety bid would have helped that but even in Fed funds futures, the pricing was largely unchanged.</p><p>The euro had tried to stage a rally earlier and accelerated on the PCE data but was reeled in on Powell to finish unchanged and at the lowest weekly close since 2003.</p><p>Cable also suffered in a big outside day to finish 90 pips lower.</p><p>Oil managed to finish slightly higher but that was little help for the commodity currencies as they all fell, though the loonie was the best of the bunch. </p><p>Most importantly might have been USD/JPY as even in a brutal day for stocks, it added 100 pips. The yen has truly lost its safe haven status and that’s a big change. It reflects rate differentials at the moment and today’s move comes with hawkish Fed connotations so there’s a fundamental backing but long-term rates were lower today and this isn’t the first time. Beware of further dollar gains from here.</p>

This article was written by Adam Button at www.forexlive.com.

<ul><li>S&P 500 down 143 points or 3.4% to 4057</li><li>Nasdaq down 3.9%</li><li>DJIA down 3.0%</li><li>Russell 2000 -3.4%</li></ul><p>Powell won’t be getting too many backslaps from anyone at Jackson Hole tonight.</p><p>The old saying is that market’s don’t bottom on Friday’s either and that data bears it out. <a target=“_blank“ href=“https://twitter.com/bespokeinvest“ target=“_blank“ rel=“nofollow“>Bespoke </a>shows that a 3% decline on a Friday averages a 1.5% decline on Monday.</p><p>And with a chart like this, ther’s plenty of downside below. It’s a bit of a head-and-shoulders top targeting 3900.</p>

This article was written by Adam Button at www.forexlive.com.

<p>I’m not a fan of the Dollar Index as a technical indicator but I think it paints the right fundamental picture at the moment. The dollar retraced modestly after a big runup to relieve some overbought conditions and now it’s ready to challenge the July highs.</p><p>Will it breakout?</p><p>The Fed</p><p>The catalyst for today’s rally is the Fed and the hawkish comments from Powell. Is that a platform for more dollar gains?</p><p>The answer is ‚yes‘ but only if you think the Fed will follow through. Market pricing hasn’t changed that much for Fed hikes today. So while Powell delivered a ‚forceful‘ hawkish message, there are questions on whether he can deliver. </p><p>It will depend on the US economy and today’s economic data wasn’t bullish for the dollar. US PCE inflation was lower than expected and consumer spending was light. Had we seen this kind of breakout on high inflation and/or another strong non-farm payrolls report, I’d be more convinced.</p><p>The field</p><p>Perhaps a better case for the dollar is relative performance. The US might not be sizzling and the Fed might not continue with 75 bps hikes but it’s certainly more than you will get elsewhere. Europe is in a full-scale energy crisis with a recession right around the corner. Japan is losing its status as the safe-have currency of choice and commodity-importing emerging markets are in trouble, creating direct flows into dollars. That’s a nice mix and it’s what’s fueled the dollar rally all year long. Oftentimes, that kind of structural rally doesn’t just fizzle, it leads to a spike.</p><p>The backdrop</p><p>The dollar retracement in the past five weeks was partly inspired by the Fed but also came with the risk picture improving. Now that the dollar is the safe haven of choice, it can rally if we see a further deterioration in stocks. The 3.8% decline in the Nasdaq today is a strong signal that we’re not at the bottom of the bear market yet. If this mood continues for another few weeks, the dollar breakout could have legs.</p>

This article was written by Adam Button at www.forexlive.com.