We’ve been spared from summer doldrums in financial markets this year but early next week could be something of a dud, particularly until Jackson Hole begins.

Monday kicks off with Fed’s Waller speaking at 09:15 am ET but that will be all for the day.

Tuesday features speeches from the Fed’s Bostic and Barr but is otherwise bare.

Wednesday is hardly better with only EIA weekly crude oil stocks and a 20-Year bond auction. The highlight will be the FOMC Minutes release at 14:00 pm ET; expect some dovish indicators there.

Thursday is when it picks up with jobless claims data, S&P Global PMIs (composite, services, and manufacturing), and existing home sales. The consensus for Initial Jobless Claims is 229K while existing home sales are expected to show a 0.4% decline. The Jackson Hole Symposium also begins, with extra Fed interviews usually scheduled for the early US morning.

Friday closes the week with new home sales data, expected to show a 0.6% decline to 0.63 million. The main event will be Fed Chair Powell’s speech at 10:00 am ET from Jackson Hole but with Fed pricing at 75% for 25 bps, I don’t currently see a need to make any big waves. Baker Hughes US Oil Rig Count and CFTC position data round out the day.

The Jackson Hole Symposium continues through Saturday.

For more, see the economic calendar.

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

• US August prelim UMich consumer sentiment 67.8 vs 66.9 expected
• US July housing starts 1.238M vs 1.330M expected
• China issues new gold import quotas after pause — report
• Fed’s Goolsbee: There are some things that are flashing yellow
• July Canada housing starts 279.5K vs 245.0K
• Canada June manufacturing sales -2.1% vs -2.6% expected
• Baker Hughes US oil rig count -2
• Israeli intel believes Iran response will take place at later date — report
• Biden says Gaza ceasefire deal ‚is closer than three days ago‘
• Blinken to visit Middle East starting on Sunday
• Join me on Monday for a webinar on how to dodge 7 common trading traps

Markets:

• Gold up $51 to $2507
• WTI crude oil down $1.46 to $76.70
• US 10-year yields down 4.3 bps to 3.88%
• S&P 500 up 0.2%
• JPY leads, USD lags

The US dollar was broadly weak on Friday in a move that was challenging to explain. The entire USD/JPY rally from Thursday and the positive retail sales data was wiped out while other pairs continued to climb. The later was backed by a decent risk tone and modest decline in Treasury yields but it was an outsized move that was tough to pin down.

One spot I look at is ongoing de-risking. Some of those caught up in the August rout or carry trade unwind may still be looking to de-risk.

The moves were large with the euro closing above 1.10 for the first time since January and cable adding nearly a full cent in a breakout from the weekly range. The Australian dollar rode and improving risk trade to the best levels since July 22 as that rout continues to be erased across asset classes.

The big winner on the day though was gold as it hit an all-time high and broke $2500 for the first time. On the initial touch of $2500, there was some profit taking and a quick $20 drop but the bulls reorganized and bid right through the close. The catalyst was likely a report that Chinese banks have been given fresh buying quotas, along with the widespread USD weakness.

Overall though, it was a day that left us scratching our heads and early next week is likely to do the same with a very quiet economic calendar until Jackson Hole kicks off on Thursday.

Have a great weekend.

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

US stock markets started lower today but found a footing early and slowly climbed the hill. Overall volatility was lower than it’s been and newsflow was light but the bulls should be encouraged by another positive close, led by smaller caps today.

On the day:

• S&P 500 +0.2%
• Nasdaq Comp +0.2%
• DJIA +0.2%
• Russell 2000 +0.35%
• Toronto TSX Comp flat

On the week:

• S&P 500 +3.9%
• Nasdaq Comp +5.3%
• DJIA +2.9%
• Russell 2000 +2.9%
• Toronto TSX Comp +3.3% (best weekly close ever)

The weekly gain in the S&P 500 and Nasdaq was the largest since last October.

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

HSBC analyzes the factors behind GBP’s strong performance in 2024 and discusses the potential challenges ahead. While the currency has been resilient due to its high carry, HSBC warns that the outlook may not remain as favorable, especially with expected further rate cuts by the Bank of England (BoE).

Key Points:

• GBP’s Strength in 2024:
  • GBP has been the most resilient G10 currency this year, largely due to its high carry.
  • CFTC data shows long GBP positions are near all-time highs, highlighting the currency’s attractiveness to investors.

• BoE’s August Rate Cut:

  • HSBC notes that the BoE’s rate cut in August should not be overlooked, even though the central bank has maintained a cautious stance on easing.
  • The UK’s lackluster growth outlook suggests further easing is likely, with HSBC expecting another 25bp rate cut in November.

• Structural Challenges:

  • The UK’s current account deficit is primarily financed by „other investment“ flows, linked to the carry inflows supporting GBP this year.
  • As the carry buffer narrows, HSBC anticipates that GBP may start to weaken against the USD in the coming months.

Conclusion:

While GBP has shown remarkable resilience in 2024 due to high carry, HSBC foresees potential challenges ahead. The BoE’s continued rate cuts, coupled with the narrowing carry advantage, may lead to a decline in GBP’s strength, with targets of GBP/USD at 1.26 by the end of Q3 and 1.25 by the end of Q4.

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

The recent rally in the euro hasn’t gotten much attention because there isn’t a great fundamental backing behind it. Europe’s economy continues to struggle and the move is mostly about broader US dollar selling. That said, sometimes the technicals lead the fundamentals and the poor economy in Europe is priced in at this point while a US slowdown would be a surprise.

The pair is also beaten-down in the longer term from the 1.15-ish pre-pandemic space.

I find it hard to chase anything in Europe but there are a nice series of higher lows and it would be easy enough to squeeze the shorts, at least up to 1.12. I don’t see much of a catalyst in the week ahead though.

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