<p class=“MsoNormal“>UPCOMING
EVENTS:</p><ul><li>Monday: Fed
Vice Chair Brainard.</li><li>Thursday: US
ISM Manufacturing PMI.</li><li>Friday: US
Labour Market Report.</li></ul><p class=“MsoNormal“>The main
event of the last week was of course Fed Chair Powell speech at the Jackson
Hole Symposium. It was a roughly ten-minute-long speech, short, clear, and
resolute. Inflation and price stability words were used extensively signalling
a unique focus on that topic alone and to achieve their goal as Powell said
they will “keep at it until the job is done”. He even mentioned that there will
be “softening in labour market conditions and some pain for households and
businesses”. The cost of bringing down inflation to target of course will
require, ironically, a high price. </p><p class=“MsoNormal“>Moreover,
Powell admitted that the bulk of inflation is demand-driven, and their tools
are meant exactly to work on the aggregate demand side, so to bring back in
balance the supply and demand, they will need to see “below trend growth”. He
also cited ex Fed Chair Paul Volcker – famous for defeating inflation of the
70s with aggressive tightening – when talking about “keeping at it”, which is
also a title of Volcker’s 2018 memoir published just before he died. In fact,
Powell said “the historical record cautions strongly against prematurely
loosening policy”, which is another reference to the 70s. </p><p class=“MsoNormal“>All in all,
Powell basically “fixed” his “mistake” at the last FOMC press conference when
his words of neutral rate unleashed a party in risk assets and a loosening in
financial conditions and this could be also confirmed from his line „In
current circumstances, with inflation running far above 2 percent and the
labour market extremely tight, estimates of longer-run neutral are not a
place to stop or pause.“</p><p class=“MsoNormal“>As a
consequence, in the forex space, the USD rallied hard. The combination of
global slowdown, aggressive Fed and the safe haven status makes the USD the
best currency for now and the trend should continue to be in its favour this
week. </p><p class=“MsoNormal“>This week
there will be two important reports: the US ISM Manufacturing PMI on Thursday
and the US Labour Market Report (NFP) on Friday. So, it’s most likely that we
will see USD strength into the second half of the week and then we may see some
USD weakness if the data misses big to the downside as the market may still try
some rally in risk as economic conditions worsen. </p><p class=“MsoNormal“>The US ISM
Manufacturing PMI is expected to come at 52.0 from the prior 52.8. Leading
indicators are pointing to further weakness in economic activity amid slowing
growth and tighter monetary conditions. The market will be more focused on the
prices paid component of course. </p><p class=“MsoNormal“>The US NFP
is expected to show an increase in payrolls of 285K. The unemployment rate is
expected to remain unchanged at 3.5%. The major focus will be on wages metrics
with average hourly earnings expected to show an increase of 0.4% for the M/M
figure and 5.3% for the Y/Y. </p><p class=“MsoNormal“>This article
was written by Giuseppe Dellamotta.</p>
EVENTS:</p><ul><li>Monday: Fed
Vice Chair Brainard.</li><li>Thursday: US
ISM Manufacturing PMI.</li><li>Friday: US
Labour Market Report.</li></ul><p class=“MsoNormal“>The main
event of the last week was of course Fed Chair Powell speech at the Jackson
Hole Symposium. It was a roughly ten-minute-long speech, short, clear, and
resolute. Inflation and price stability words were used extensively signalling
a unique focus on that topic alone and to achieve their goal as Powell said
they will “keep at it until the job is done”. He even mentioned that there will
be “softening in labour market conditions and some pain for households and
businesses”. The cost of bringing down inflation to target of course will
require, ironically, a high price. </p><p class=“MsoNormal“>Moreover,
Powell admitted that the bulk of inflation is demand-driven, and their tools
are meant exactly to work on the aggregate demand side, so to bring back in
balance the supply and demand, they will need to see “below trend growth”. He
also cited ex Fed Chair Paul Volcker – famous for defeating inflation of the
70s with aggressive tightening – when talking about “keeping at it”, which is
also a title of Volcker’s 2018 memoir published just before he died. In fact,
Powell said “the historical record cautions strongly against prematurely
loosening policy”, which is another reference to the 70s. </p><p class=“MsoNormal“>All in all,
Powell basically “fixed” his “mistake” at the last FOMC press conference when
his words of neutral rate unleashed a party in risk assets and a loosening in
financial conditions and this could be also confirmed from his line „In
current circumstances, with inflation running far above 2 percent and the
labour market extremely tight, estimates of longer-run neutral are not a
place to stop or pause.“</p><p class=“MsoNormal“>As a
consequence, in the forex space, the USD rallied hard. The combination of
global slowdown, aggressive Fed and the safe haven status makes the USD the
best currency for now and the trend should continue to be in its favour this
week. </p><p class=“MsoNormal“>This week
there will be two important reports: the US ISM Manufacturing PMI on Thursday
and the US Labour Market Report (NFP) on Friday. So, it’s most likely that we
will see USD strength into the second half of the week and then we may see some
USD weakness if the data misses big to the downside as the market may still try
some rally in risk as economic conditions worsen. </p><p class=“MsoNormal“>The US ISM
Manufacturing PMI is expected to come at 52.0 from the prior 52.8. Leading
indicators are pointing to further weakness in economic activity amid slowing
growth and tighter monetary conditions. The market will be more focused on the
prices paid component of course. </p><p class=“MsoNormal“>The US NFP
is expected to show an increase in payrolls of 285K. The unemployment rate is
expected to remain unchanged at 3.5%. The major focus will be on wages metrics
with average hourly earnings expected to show an increase of 0.4% for the M/M
figure and 5.3% for the Y/Y. </p><p class=“MsoNormal“>This article
was written by Giuseppe Dellamotta.</p>
This article was written by ForexLive at www.forexlive.com.