UPCOMING EVENTS:

• Monday: UK
  Bank Holiday, Australian Retail Sales.
• Tuesday: Japan
  Unemployment Rate, US Consumer Confidence, US Job Openings.
• Wednesday: Australia
  CPI, US ADP.
• Thursday: Japan
  Retail Sales, Chinese PMIs, ECB Minutes, Eurozone CPI, Eurozone
  Unemployment Rate, US Jobless Claims, US Core PCE.
• Friday: Swiss
  CPI, US NFP, US ISM Manufacturing PMI.

Tuesday

The US Consumer Confidence has been
sizzling up in the past few months as the consumers continue to see a strong
labour market, higher real wages, and lower inflation.
Compared to the University of Michigan Consumer Sentiment, which shows more how
the consumers see their personal finances, the Consumer Confidence shows how
the consumers
see the labour market. The consensus sees the
index at 113.4 in August vs. 117.0 in July.

The labour market data is now the top
priority for the Fed and the markets
as a softer labour market is what is seen as needed to reach the 2% inflation
target sustainably. After reaching the peak in May 2022, Job Openings have been
trending lower although they are seen as still too high. The consensus sees Job
Openings increasing to 9.793M in July vs. 9.582M in June.

Wednesday

The monthly Australian CPI Y/Y data is
expected to show further disinflation with the consensus looking at 5.2% in
July vs. 5.4% in June. The latest RBA
Meeting Minutes showed that the central
bank prefers to remain on hold and given the recent weaker data like the Employment
Report, it looks like only a notable beat
can stir the RBA from this path.

The US ADP continues to be pretty useless in
forecasting the US NFP, but the market keeps on reacting to it, nonetheless.
The consensus sees 195K new hires in August vs. 324K in July.

Thursday

The Chinese Manufacturing PMI is expected
to tick higher to 49.5 vs. 49.3 prior, while there’s currently no consensus on
the Services reading although it was 51.5 in July. The Chinese economy has been
struggling for quite some time and, despite promises of more support from the
authorities, the market interpreted the latest actions as not enough.

The Eurozone CPI Y/Y is expected to move
lower to 5.1% vs. 5.3% prior, while the M/M figure is seen at -0.1% vs. -0.1%
prior. The Core CPI Y/Y is expected at 5.3% vs. 5.5% prior. There’s a
growing sentiment among the ECB members that downside risks have materialised,
and it requires a more careful assessment on the policy front. The market sees
a 50/50 chance for a 25 bps hike at the September meeting and this report should
decide what we will likely see at the next policy decision. The Unemployment
Rate is seen unchanged at 6.4%.

The US Jobless Claims remain a key
leading indicator for the labour market, and they’ve been signalling continued
strength. The consensus sees Initial Claims at 235K vs. 230K prior, while
Continuing Claims are expected at 1709K vs. 1702K prior.

The US PCE Y/Y is expected at 3.3% vs.
3.0% prior, while the M/M figure is seen at 0.2% vs. 0.2% prior. The Core
PCE Y/Y, which is the Fed’s preferred inflation measure, is expected at 4.2%
vs. 4.1% prior, while the M/M reading is seen at 0.2% vs. 0.2% prior. I
don’t expect this report to be market moving given that the market is more
focused on the more timely CPI data.

Friday

The Switzerland CPI Y/Y is expected to
match the prior reading at 1.6%, while the M/M figure is seen at 0.2% vs. -0.1%
prior. As a reminder, the inflation rate in Switzerland is already in the
SNB’s 0-2% target band on both the headline and core measures, but the
central bank maintains its hawkish stance wary of upside risks. Nonetheless, the market sees the SNB to remain on hold at the next meeting.

The main event of the week will be, of
course, the US NFP report. The consensus sees 170K jobs added vs. 187K prior
with the Unemployment Rate remaining unchanged at 3.5%. The Average Hourly
Earnings Y/Y is seen at 4.4% vs. 4.4% prior, while the M/M figure at 0.3% vs.
0.4% prior. This report coupled with the US CPI in two weeks will decide if
the Fed will hike or pause at the September meeting, as per their words
they will “decide on the totality of the data”. In my opinion, given the
Fed’s particular focus on the labour market, in case we get a hot report, the
market is likely to anticipate a hawkish reaction without waiting for the CPI
data.

The US ISM Manufacturing PMI is expected
to tick a little higher to 46.6 vs. 46.4 prior. The US S&P Global
Manufacturing PMI missed expectations by a big margin last week, so the
sentiment going into this report is likely to be skewed to the downside. There
should also be particular attention to the employment sub-index which tumbled
to cycle lows in the prior report.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Week Ahead August 28th – September 1st

• Mon: Australian Retail Sales (Jul)
• Tue: NBH Announcement, German GfK Consumer Sentiment (Sep), US CaseShiller (Jun) and JOLTS (Jul)
• Wed: Australian CPI (Jul), Spanish Flash CPI (Aug), EZ Sentiment Survey (Aug), US GDP 2nd Estimate (Q2), US ADP National Employment (Aug)
• Thu: ECB Minutes, Japanese Retail Sales (Jul), Chinese Official PMI (Aug), German Retail Sales (Jul)/ Unemployment (Aug), EZ Flash CPI (Aug), US Challenger Layoffs (Aug), US PCE (Jul)
• Fri: Chinese Caixin Manufacturing PMI (Aug), Swiss CPI (Aug), EZ/UK/US Final Manufacturing PMI (Aug), ISM Manufacturing PMI (Aug), US Labour Market Report (Aug), Canadian GDP (Q2)

Note: Previews are listed in day order

Australian Retail Sales (Mon): Retail sales are forecast to rise 0.3% MM in July following a contraction of 0.8% in the previous month. Analysts at Westpac expect a number slightly above market expectations, citing a slight firming in their Westpac Card Tracker in July. “Population growth alone is running at 0.2%mth. As such, even if sales hold flat in real (i.e. inflation-adjusted) per capita terms, total nominal sales would be up about 0.4%mth. We expect that to be broadly the story in July, with a 0.4% rise for the month, the desk adds.

Australian CPI (Wed): The monthly CPI data is expected to show a cooling to 5.2% in July from 5.4% in June. These recently introduced monthly inflation metrics have become paramount for the RBA’s data-dependent policy steering, given that data used to be released quarterly. For this month, the desk at Westpac suggests “Electricity presents a key risk this quarter both in terms of the impact of state energy rebates and the timing of bill increases. The ABS recently introduced a monthly electricity price series for the CPI, but it only goes back to September 2017 so we don’t have a good handle on the monthly seasonality of electricity price changes.” At the latest RBA meeting, the statement from Governor Lowe highlighted “Returning inflation to target within a reasonable timeframe remains the Board’s priority” but clarified that “To date, medium-term inflation expectations have been consistent with the inflation target and it is important that this remains the case.” Governor Lowe also warned that “Some further tightening of monetary policy may be required”, with markets currently pricing around a 90% chance of a hold at 4.10%, according to the ASX 30 Day Interbank Cash Rate Futures.

Chinese PMIs (Thu): China’s NBS Manufacturing PMI is expected to tick higher, but remain in contraction territory – with the metric forecast at 49.5 in August (prev. 49.3 in July). There are currently no expectations for the non-manufacturing and Composite readings. China’s economic struggles have been telegraphed by the latest trifecta of disappointing data in the form of trade, inflation, and activity – which all largely underscored ailing demand both domestic and abroad. Since then, Chinese authorities have released a series of measures to boost the economy and stem the slide in stock markets, although desks suggest it will take time for the stimulus to filter through to the real economy. Analysts at ING expect a further deterioration in the Chinese PMIs, both the official and Caixin releases “ as we await more substantial support from the government to boost domestic demand while global demand remains weak.” On the flip side, the desk suggests “One positive next week would be that the non-manufacturing PMI may still register a modest expansion even if the index edges lower, as it is still the summer holiday season when many families travel and boost business.”

EZ Flash CPI (Thu): Expectations are for headline Y/Y flash CPI in August to fall to 5.1% from 5.3% with the super-core metric seen moving lower to 5.3% from 5.5%. The prior report saw the headline pullback from 5.5% to 5.3% amid a negative contribution from energy prices, whilst the super-core reading held steady “thanks to diverging developments between non-energy industrial goods and services inflation” as opined by ING. For the upcoming release, analysts at Moody’s suggest that the decline in the headline will be prompted by food and core inflation, counteracting a potential increase in energy inflation given the runup in crude oil prices. Digging deeper into core inflationary pressures, analysts expect the reading to ultimately inch lower “as services inflation stabilizes and core goods inflation falls thanks to lower producer prices”. That said, the desk cautions that there is a risk “that services inflation may tick up, buoying overall core inflation”. From a policy perspective, last week’s soft PMI metrics prompted a dovish repricing for the ECB’s September meeting with the decision now seen as a coin flip between unchanged and a 25bps increase. Furthermore, subsequent source reporting revealed that momentum at the ECB is growing for a pause on rate hikes as recession fears increase. The report added that the debate is still open given inflation metrics are set to be released this week and any decision to pause would need to make clear future hikes could still be needed. Furthermore, several policymakers cautioned against reading too much into survey data such as the August PMIs as there is a growing gap between hard data and sentiment readings. As such, it appears that next week’s inflation metrics will prompt a significant repricing one way or the other.

ECB Minutes (Thu): As expected, the ECB pulled the trigger on another 25bps hike, taking the deposit rate to 3.75%. Aside from the decision itself, focus for the statement was on the modest adjustment to the Bank’s language on future decisions whereby the key ECB interest rates will be „set at“ sufficiently restrictive levels for as long as necessary vs. the previous wording of „brought to“. Elsewhere, the GC also opted to set the remuneration of minimum reserves at 0% (vs. prev. matching the deposit rate). In the follow-up press conference, Lagarde stated that policymakers were unanimous in their stance. When initially questioned over whether she thinks the Bank has more ground to cover, she said the decision will be based on the data and the GC is „open-minded“. When pressed on the matter later during the press conference, Lagarde stated that at this moment in time she „would not say so“ with regards to there being more ground to cover; given the mixed interpretations of this statement, it will be interesting to see if the account can provide any greater clarity on the matter. On the balance sheet, Lagarde remarked that a reduction had not been discussed and there would be no trade-offs between rates and QT. Overall, the main takeaway ahead of the September meeting was that the ECB was happy to either pause on rate hikes or carry out further tightening, however, any decision to do so would be based on how the data plays out between now and then. On which, it is worth noting that the inflation data the morning of the release may well tip the balance for the September meeting which is a near-enough coin flip between unchanged and a 25bps hike after the soft PMI data for August prompted a dovish repricing last week. With this in mind, and as is often the case, the account of the previous meeting will be deemed stale and pass with little in the way of fanfare.

US PCE (Thu): Headline PCE prices are expected to rise 0.2% M/M in July (prev. 0.2%), while the core rate is seen rising by the same magnitude, and also matching the prior; the annual rate of core inflation is likely to tick-up to 4.3% Y/Y from 4.1%. Credit Suisse says that the PCE deflator, the Fed’s preferred measure of inflation, is likely to confirm the disinflation already evident in July’s CPI report. The bank is in line with the consensus regarding its expectations. „Gradual disinflation in shelter should weigh on the run rate of PCE in the coming months,“ it writes, „however, shelter is a smaller weight in PCE than CPI inflation, and more limited progress on other core services, which are a higher weight, could keep PCE stickier than CPI later in the year.“

Swiss CPI (Fri): July’s release printed at 1.6%, in-line with market expectations and incrementally below the SNB’s Q3 forecast of 1.7%, which was set during the June gathering. For the August metric, we look for any skew around the SNB’s 1.7% forecast. In particular, an above-forecast reading would be a point of concern for policymakers as it would indicate that their forecast for inflation to lift back above the 0-2% band from Q1-2024 onwards remains in play. As it stands, market pricing currently ascribes a circa. 70% chance of an unchanged rate decision at the upcoming September gathering.

ISM Manufacturing PMI (Fri): The consensus looks for a little change, at 47.0 in August (prev. 46.9). Although there are some differences in the ISM data vs the S&P Global PMI data, the flash release of the latter showed the manufacturing PMI falling to a two-month low of 47.0 (from 49.0 in July), while the output index dropped below 50.0, to 47.5 (from 50.2). The report from S&P said that it was a signal of a „solid deterioration“ in operating conditions midway through Q3; „the decline was the second-sharpest since January, as a renewed drop in output and steeper decrease in new orders weighed on the overall performance of the sector,“ it added, with the lower new sales leading to a retrenchment among manufacturers as input buying fell at a quicker pace. S&P said the fall in purchasing activity reflected a reduced need to store materials and finished items, and subsequently, manufacturing inventories declined further. „Despite lower demand, vendor performance improved to the smallest extent since February,“ S&P wrote, „some companies stated that a shortage of drivers at suppliers frustrated efforts to reduce delivery times.“

US Jobs Report (Fri): The consensus looks for 160k nonfarm payrolls to be added to the US economy in August (prev. 187k), and the unemployment rate is expected to remain at 3.5%, while average hourly earnings are seen rising 0.3% M/M, cooling from a rate of 0.4% seen in July. Analysts have been looking for the rate of job additions to cool as we progress further towards the end of the year. The Fed has projected that the jobless rate will rise to 4.1% by the end of this year, though officials have been noting the resilience of the labour market recently; recent initial jobless claims data, for instance, has failed to meaningfully spike higher, and in the survey week that coincides with the BLS jobs report window, the four-week moving average was at 234.5k (vs 237.5k going into the July data), and continuing claims was at 1.697mln (vs 1.717mln). Elsewhere, the BLS this week published its prelim estimates for the upcoming benchmark revisions to payroll employment, revising down employment levels for the year through March 2023 by 306k. Moody’s explained that „the eventual benchmark changes, released early next year, will impact the full period from April 2022 through March 2023,“ adding that the data was in line with its expectations „that employment growth will be revised lower, and while the monthly details are not yet known, the size of the revision would imply a 25k per month reduction in job growth.“

This article originally appeared on Newsquawk.

This article was written by Newsquawk Analysis at www.forexlive.com.

• US equities finish the week on a high note
• ECB’s Kazaks: I’m in no rush to say that we are done on rates
• Lagarde: „Pretty confident“ that by end-2023 inflation numbers will look different
• ECB Lagarde: Need to set rates at sufficiently restrictive level for as long as necessary
• WTI crude futures settle at $79.83
• As the month moves to a close, where have the markets taken traders?
• Baker Hughes total rigs down to 632 from 642 last week
• Goolsbee: Still feels confident about reaching the „golden path“ of a soft landing
• European indices snapped back higher into the close and end the day positive
• Fed’s Mester: We probably still have more work to do
• A September UAW strike is almost a sure thing
• Fed’s Harker says he doubt rate cuts are on the table until next year at some point
• Powell: We are prepared to raise rates further if appropriate, will proceed carefully
• July final UMich US consumer sentiment 69.5 vs 71.2 expected
• Belgian August business sentiment -14.9 vs -14.8 prior
• How Christine Lagarde could steal the show at Jackson Hole
• Kickstart your FX trading with a technical look at the EURUSD, GBPUSD and USDJPY
• Canada prelim July wholesale sales +1.4%
• The AUD is the strongest and the CHF is the weakest as a North American traders enter
• ForexLive European FX news wrap: Tentative mood as stocks keep steady for now, Powell eyed

Fed’s Powell’s Jackson Hole speech finally came and unlike last year when the speech was short and sweet and to the point, there was little bit of something for everyone :

Regarding monetary policy and rate decisions:

• Prepared to raise rates further if deemed necessary.
• The next move will be based on data.
• The Federal Reserve will proceed ‚carefully‘ when deciding to hike rates again or maintain them.
• There’s uncertainty in the economy, necessitating ‚agile‘ monetary policy-making.

On economic observations:

• Inflation remains higher than desired.
• Two months of positive data are just the beginning; more is needed to gain confidence in the inflation trajectory.
• The current policy is restrictive, but the neutral rate level is uncertain.
• The Federal Reserve remains committed to a 2% inflation target.
• A decrease in inflation might also require a softer labor market.
• Signs of the job market not cooling could lead to more actions from the Federal Reserve.
• There’s evidence that inflation is becoming more responsive to labor market conditions.

Unique Economic Dynamics:

• Supply and demand dislocations in this cycle have unique effects on inflation and labor market dynamics.
• Job openings have decreased without a corresponding rise in unemployment, indicating a significant demand for labor.
• Inflation appears to be more sensitive to labor market conditions than in recent decades.

Conclusion and Outlook:

• The Federal Reserve is navigating uncertain economic conditions.
• Risk-management is crucial given the current uncertainties.
• Decisions in upcoming meetings will be based on a comprehensive assessment of data, outlook, and risks.
• The primary goal is to restore price stability, which is essential for achieving the dual mandate of strong labor market conditions and stable prices.
• The Federal Reserve is committed to continuing its efforts until the objectives are met.

Other Fed members who spoke today included Fed Harker:

• Doubt that rate cuts are on the table until next year at some point
• Reiterated his feeling that he does not see the need for more rate hikes now

Feds Goolsbee also spoke today and typically a dove, but his comments were a little bit more hedging :

• Still confident about reaching the golden path of a soft landing
• He thinks there is a long way to go on inflation
• 3% inflation was lower but largely due to energy which can move back higher as well
• We have not seen consumer spending deteriorate like you normally see given the rising yields
• He is patient about getting to a 2% target

Market Reaction:

The market’s initial reaction was a slight dip in the dollar, possibly due to the ‚carefully‘ comment, which might be perceived as dovish. The dollar than reversed to the upside, only later to come off the high levels, but still closed higher.

For a September hike the odds remain around 20% but for a November hike the odds move back above the 50% level.

For the day , the greenback is ending as the strongest of the major currencies, but gains are relatively modest. The USDJPY was the biggest mover with the USD moving higher by 0.40%. The next largest gainer for the USD was vs. the NZD with a gain of 0.25%. Versus the USDCHF, the dollar, was virtually unchanged.

US rates are ending the day with mixed results. The shorter end is higher with the two-year closing the week over 5% at 5.0779 (up 5.9 basis points today). Meanwhile, the 10-year yield is down -0.4 basis points at 4.231%.

For the trading week the pattern was the same with the 2 year yield higher the longer end yields actually fell on the week.

• 2-year yield rose 12.7 basis points
• 5-year yield rose 4.9 basis points
• 10-year yield fell -2.6 basis points
• 30-year yield fell 10 basis points

US stocks had a volatile day. The NASDAQ index led the charge after tumbling yesterday. Today, it fell -87.63 points at its session lows but rose 169.45 points at its highs. The S&P and Dow industrial average had similar up-and-down price action throughout the day.

The final numbers are showing:

• Dow industrial average rose 247.48 points or 0.73% at 34346.91
• S&P index rose 29.40 points or 0.67% at 4405.72
• NASDAQ index rose 126.66 points or 0.94% at 13590.64

For the trading week:

• Dow industrial average fell -0.45%
• S&P index rose 0.82%
• NASDAQ index rose 2.26%

In other markets:

• Crude oil is trading at $80. For the trading week, the price fell -0.82%
• Gold today fell $-2.30 or -0.12% at $1914.52. For the trading week, the price rose 1.36%.
• Silver rose $0.10 or 0.45% at $24.21. For the trading week silver rose 6.5%
• Bitcoin is trading at $26,029 and marginally lower than the price a week ago at $26,192.

Next week, is US jobs week with the US employment report being released on Friday. That data will be preempted by the ADP report report on Wednesday, and Challenger job cuts on Thursday. The jolts job data will be announced on Tuesday. US GDP will be announced on Wednesday and personal income and spending will be announced on Thursday.

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

Here’s to long weekends!

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

• S&P 500 +0.6%
• DJIA +0.7%
• Nasdaq Comp +.09%
• Russell 2000 +0.4%
• Toronto TSX Comp +0.5%

On the week:

• S&P 500 +0.8
• DJIA -0.4%
• Nasdaq Comp +2.3%
• Russell 2000 -0.4%
• Toronto TSX Comp -0.1%

The chart of the Russell 2000 is concerning. It looks topped out and the economy is weakening. There was a doji this week on an otherwise-decent week for risk trades. Maybe it can stabilize if yields come back down but four weeks in a row of declines isn’t promising.

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

• In no rush to say that we are done on rates, a rate pause wouldn’t mean stopping
• We will see the data then decide
• Stopping too early is bigger problem than cutting
• Should return to 2% target sooner than end-2025

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

• Disinflation has to be ‚timely‘ and ’sustainable‘
• German growth not broken and demonstrating resilience
• Proximity to war in Ukraine part of the reason for differing economic paths for US and Europe
• Changing inflation target would be ‚deceptive‘ and counter to anchoring expectations

That’s a dovish headline from Lagarde, though hardly a signal about a Sept pause.

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

• Equities hold steadier on the day, at least for now..
• A look at the Fed pricing ahead of Jackson Hole later today
• ICYMI: The agenda for the Jackson Hole symposium
• Germany August Ifo business climate index 85.7 vs 86.7 expected
• Germany Q2 final GDP 0.0% vs 0.0% q/q prelim
• China reportedly plans to cut stamp duty on stock trading in bid to recover sentiment
• BOJ to keep policy as it is until at least July 2024 – poll

Markets:

• USD mixed
• European equities higher; S&P 500 futures up 0.2%
• US 10-year yields up 1 bps to 4.245%
• Gold down 0.1% to $1,916.18
• WTI crude up 1.2% to $80.02
• Bitcoin up 0.3% to $26,092

It was a quiet session in terms of headlines as markets are waiting on the Jackson Hole symposium or more specifically Fed chair Powell’s speech later. Personally, I don’t expect anything new from Powell but it has been a while since he last spoke and markets are hoping for something to work with.

Equities are keeping steadier on the day but as has been the case in the past two weeks, the heavy selling tends to only hit in US trading. So, watch out for now. I wouldn’t look much into the slight gains today unless Wall Street follows up on that.

The dollar was slightly higher earlier on but has seen gains pared during the session. EUR/USD looked to keep with the downside break in a push to 1.0770 but is now being rechecked back at 1.0800. Similarly, GBP/USD touched a low of 1.2560 but has reversed higher to 1.2610 for now at least.

All eyes will be on equities sentiment once again and if we do see another ugly session ahead, that should keep the dollar underpinned.

I wish you all a pleasant Friday and a wonderful weekend ahead!

This article was written by Justin Low at www.forexlive.com.

It was mostly the euro and pound which were pressured lower against the dollar earlier. But we are seeing both currencies turn back to near flat levels on the day now with EUR/USD back up to 1.0800 and GBP/USD up to just above the 1.2600 mark. Here’s a snapshot of things and you can see how the ranges remain fairly tight and dollar pairs are basically flat currently:

After having been wrong-footed yesterday, it seems like European traders are happy to wait on North America traders to make their move especially as stocks have the risk and tendency to reverse later in the day.

Going back to the dollar, EUR/USD has key resistance at around 1.0800 with the 200-day moving average at 1.0802 one to watch today as highlighted here. Besides that, GBP/USD is keeping below its 100-day moving average and that key level is seen at 1.2638. Stay below that and sellers will be in control.

This article was written by Justin Low at www.forexlive.com.

As such, the calm and steadier mood we’re seeing today belies the nervousness and fragile sentiment that is prevailing currently. Here’s a snapshot so far on the day:

• Eurostoxx +0.6%
• Germany DAX +0.5%
• France CAC 40 +0.7%
• UK FTSE +0.4%
• S&P 500 futures +0.2%
• Nasdaq futures +0.1%
• Dow futures +0.3%

After being burned by the Nvidia hopium yesterday, tech stocks are the ones that are less enthused so far today. And after the ugly reversal, the S&P 500 has pretty much erased gains for the week although the Nasdaq is still up a little over 1%. The Dow is the laggard as it is now down over 1% on the week coming into today.

In any case, just be wary that the pessimism can quickly accelerate in US trading as we have seen time and time again in the past two weeks. So far, broader markets are also calmer on the day as such. But if we are to lean to being more risk averse again, the dollar is likely to shine before the weekend comes along.

This article was written by Justin Low at www.forexlive.com.