• Medium-term outlook had not changed overall relative to June meeting
• Short-term outlook has become somewhat more „stagflationary“
• But weaker activity is likely to dampen inflation over time
• Economic balance remains lopsided, mostly still driven by services activity
• Labour market remains tight
• The persistence in services inflation remains the central element shaping the inflation outlook
• Inflation could turn out higher than anticipated if wages increased by more than expected
• Monetary policy transmission was unfolding according to expectations
• Extensive new data will be available by the time September meeting takes place
• The meeting is seen as a good time to re-evaluate the level of monetary policy restriction
• But should be approached with an open mind, which also implies data dependence
• Full accounts

They still have about three weeks to guide markets the other way if they so choose not to cut again next month. But given the balance of probabilities and the prevailing language at the moment, a 25 bps rate cut is pretty much locked in.

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

Currency dynamics and inflation is always a tricky ordeal to debate and/or navigate through. But for most major economies, currency movements are rather controlled and arguably play a small role in terms of influencing price pressures. The same goes for the euro area, or so at least that is what the ECB has been preaching over the years.

If we put that aside, what does the recent rise in the euro mean for the central bank and also the economy in general? Let’s take a look.

First off, let’s check on how the euro is performing in 2024 as a whole. With the dollar as the benchmark, the single currency is actually the second best performer among the major currencies.

And even so, the euro is just up nearly 1% only against the greenback. It feels rather surprising to see that, no? That especially given the dark outlook surrounding the dollar recently.

Going back on topic, how does this really impact the euro area economy if at all?

Well, considering the state of the manufacturing sector – especially Germany – a stronger euro is not exactly a helping factor in that regard. Demand conditions are weak and foreign demand is also struggling, not least with China’s worries. But with manufacturing already struggling, a stronger currency will make for more expensive exports and not help with the industry plight.

It’s certainly not too strong a factor yet considering the changes as seen above. However, every small thing counts especially when the economy is starting to show signs of a struggle again in Q3.

The ECB having to cut rates at a quicker pace might help to limit this as a factor in general. But their main battle is still on the inflation front, unlike the Fed.

As such, a stronger euro might be welcome slightly especially since it looks like we’re encountering a couple of bumps along the way in the disinflation process. That despite the argument above from the ECB that the exchange rate isn’t quite as important a factor in influencing prices.

Anyway, the latest CPI report in July here shows that price pressures aren’t exactly worsening but they’re not coming down all too quickly and convincing either.

If there is a tick up in inflation, even if due to base effects, towards year-end then that could give reason for the ECB to pause once again.

And that might invite further strength to the euro, with traders having now priced in ~66 bps of rate cuts in the next three meetings to December.

In turn, that feeds back into the cycle of putting more pressure on the manufacturing industry. And it all circles back to heaping pressure on the ECB again in having to chase rate cuts amid a stuttering economy.

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

• Prior -32

UK factory orders fell once more this month but less than July at least. The output expectations balance remains positive at least, though down to 9 from 25 in the month before. CBI notes that „the stop-start recovery seen in recent months continued in August but it is encouraging that manufacturers still remain confident that output will tick up over the autumn“.

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

• Prior +16.8%
• Market index 225.8 vs 251.3 prior
• Purchase index 130.6 vs 137.7 prior
• Refinance index 754.4 vs 889.3 prior
• 30-year mortgage rate 6.50% vs 6.54% prior

After the surge in mortgage applications in the week before that, we are seeing things moderate back last week. The surge in activity in the week before owes much to the sharp drop in rates, with it weighing on the average rate of the most popular US home loan once again.

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

Fundamental
Overview

The USD continues to remain
under pressure amid positive risk sentiment and the imminent rate cuts from the
Fed which should help global growth. These are generally bearish drivers for
the greenback.

In fact, the recent strong
appreciation of the NZD has been mostly driven by the US Dollar side of the
equation. After the recent more dovish than expected RBNZ decision, the market is pricing a 95% probability of a rate cut in October and then at least another 25 bps cut before year-end.

The focus now will be on
tomorrow’s Flash US PMIs and then Fed Chair Powell speech at the Jackson Hole
Symposium on Friday.

NZDUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that NZDUSD broke above the key resistance zone around the 0.6050 for good
this time and extended the gains into the 0.6150 level. This is where we can
expect the sellers to step in with a defined risk above the level to position
for a drop back into the 0.6050 support. The buyers, on the other hand, will
want to see the price breaking higher to increase the bullish bets into the 0.6217
resistance.

NZDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a very strong support zone around the 0.6050 level where we
can find the confluence
of the trendline
and the 61.8% Fibonacci
retracement level. If the price were to get there, we can expect the buyers
to step in with a defined risk below the support to position for a rally into
new highs with a better risk to reward setup. The sellers, on the other hand,
will want to see the price breaking lower to increase the bearish bets into new
lows.

NZDUSD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we broke below a minor upward trendline today which was defining the
bullish momentum since the 0.60 handle. This could be a signal of waning momentum,
so the buyers will likely wait for a bigger pullback or a catalyst before resuming
the uptrend. The red lines define the average daily range for today.

Upcoming
Catalysts

Tomorrow we get the US Jobless Claims and US PMIs. On Friday we conclude the
week with Fed Chair Powell speaking at the Jackson Hole Symposium.

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

Even though the lack of headlines in the last two days were befitting of a summer lull, there was some decent action in markets. But today, that seems to be absent with broader markets also struggling for any conviction. US futures are flat while bond yields are also little changed on the day. That isn’t giving FX traders much to work with as such.

USD/JPY remains caught in a whirlwind of sorts, trading in a roughly 130 pips range today. The pair is up 0.5% to near 146.00 and well off its low of 144.92 from Asia trading earlier.

Besides that, other major currencies are struggling to really get going today. The dollar has been weaker so far this week but is keeping steadier for now. That said, the ranges among dollar pairs are leaving a lot to be desired.

And as a whole, the dollar remains vulnerable to a further drop as highlighted yesterday here.

The focus this week continues to be on the PMI data tomorrow and then Fed chair Powell’s appearance in Jackson Hole just before the weekend.

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

Fundamental
Overview

The USD continues to remain
under pressure amid positive risk sentiment and the imminent rate cuts from the
Fed which should help global growth. These are generally bearish drivers for
the greenback.

In fact, the appreciation
of the AUD has been mostly driven by the US Dollar side of the equation,
although it outperformed the other major currencies due to the hawkish RBA. In
fact, the market pared back more aggressive rate cuts expectations and it’s now
seeing just one cut by the end of the year.

The focus will be on
tomorrow’s Flash PMIs and then Fed Chair Powell speech at the Jackson Hole
Symposium on Friday.

AUDUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that AUDUSD had an incredible rally from the lows set at the beginning of August
as the market erased the growth scare and added to the gains as the risk sentiment
kept on improving. The next target for the buyers should be the high at the
0.68 handle. The sellers, on the other hand, will want to see the price falling
back below the key 0.67 handle to start target new lows.

AUDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we now have a good support
zone around the 0.67 handle where we can find also the trendline
for confluence.
This is where we can expect the buyers to step in with a defined risk below the
trendline to position for new highs with a better risk to reward setup. The
sellers, on the other hand, will want to see the price breaking lower to pile
in for a drop into the 0.6550 level next.

AUDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, there’s
not much else we can glean from this timeframe other than waiting for a pullback
into the key support zone where the buyers will look for a bounce, while the
sellers will look for a break. The red lines define the average daily range for today.

Upcoming
Catalysts

Tomorrow we get the Australian PMIs, the US Jobless Claims and US PMIs. On
Friday we conclude the week with Fed Chair Powell speaking at the Jackson Hole
Symposium.

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

Trading
in financial markets is often perceived as a high-stakes game of numbers,
charts, and quick decisions. However, if you look closer, trading is much more
than just buying low and selling high, it’s an intricate art that parallels the
disciplines, strategies, and mentalities found in sports. The art of trading will
be of particular note at the upcoming Finance Magnates Pacific Summit (FMPS),
taking place on August 27-29 in Sydney, Australia.

This
inaugural event is taking place at the International Convention Centre in
downtown Sydney, drawing plenty of retail traders, brokers, service providers and
other elements of the financial services industry. Whether you are a veteran or
just starting your trading journey, FMPS is your destination for actionable
learning, networking opportunities, and much more.

FMPS
is catering extensively to retail traders with the Exchange Stage, a dedicated
forum to promoting insightful learning and hearing from qualified experts and
speakers. Throughout the two-day event, this stage will play host to a wide
range of workshops, each of which can be accessed via the full-length
agenda.

There is no shortage of relevant sessions in store
for attendees, with plenty designed to educate traders. This includes the
upcoming workshop ‘The Art of Trading – It’s Just Like Playing a Sport’.

The final
countdown is underway with less than one week to go until FMPS. Online registration
is still available for only a few more days so do not delay! If you have not already
done so, make sure to head on over to the event website and register
today. Skip the queues on-site and make sure to sign up in advance
to save time!

What
Do Trading and Sports Have in Common?

Trading
and sports share common ground, and many individuals can learn from the world
of athletics to become better traders. Whether it is discipline and consistency
or preparation and analysis, both of these avenues provide valuable lessons.

By
embracing these principles, traders can approach the markets with the mindset
of an athlete, enhancing their chances of success. Just as in sports, where
continuous learning and adaptation lead to mastery, trading demands a
commitment to growth, resilience, and the pursuit of excellence.

Wherever
an individual is in their respective trading career or pursuit, viewing one’s journey
through the lens of sports can provide valuable insights and a competitive edge
in the financial markets.

Join
leading experts who can help touch on this topic and more in the upcoming panel,
‘The Art of Trading – It’s Just Like Playing a Sport’. This session will take
place on August 29 at the Exchange Stage at 16:00-16:20 featuring Justin Low, Currency Analyst at ForexLive.

Workshop
participants can expect to learn what it takes to succeed as a trader and which
attributes to focus on. Most importantly, attendees can figure out the traps to
avoid and the similarities between both sports and trading.

This
is one session that any retail trader cannot afford to miss this August. See
you next week in Sydney!

This article was written by Jeff Patterson at www.forexlive.com.

• Will the Jackson Hole event be bearish for stocks?
• Bundesbank says wage growth has slowed down in Q2
• Eurozone July final CPI +2.6% vs +2.6% y/y prelim
• Dollar on troubled shores so far this week
• Eurozone June current account balance €51.0 billion vs €36.7 billion prior
• European equities open marginally higher to kick start the day
• What are the main events for today?
• Eurostoxx futures +0.1% in early European trading
• Germany July PPI +0.2% vs +0.2% m/m expected
• Switzerland July trade balance CHF 4.89 billion vs CHF 6.18 billion prior
• Gold breakout holds more tentative for now
• The Trump-Harris debate for 4 September will no longer take place
• Not too much on the agenda in European trading later today

Markets:

• NZD leads, EUR lags on the day
• European equities mostly flat;
  S&P 500 futures slightly higher
• US 10-year yields up 10 bps to
  3.875%
• Gold
  up 0.8% to $2,523.80
• WTI
  crude up 0.38% to $73.87
• Bitcoin
  up 1.8% to $60,562

It was
another slow session due to the lack of key economic releases. The sentiment in
the markets remains mostly positive as everyone’s looking forward to Fed Chair
Powell’s speech on Friday expecting a pre-commitment to a rate cut in
September.

In the FX
market, the major pairs are basically flat on the day with the USD remaining on
the backfoot amid the risk-on sentiment. Equities continue to benefit from the
prospects of rate cuts into resilient growth as that should boost economic
activity.

Gold has
been another notable mover in the past few days as it reached a new all-time
high. The Fed’s monetary policy trajectory is one of the main drivers of the
precious metal as it influences real yields.

The recent crude oil
weakness, on the other hand, has been a head-scratcher but I can see the
pricing out of the geopolitical risk premium as the main reason as lots of time has passed
and we haven’t got any Iran retaliation.

Bitcoin should
be another major beneficiary of the easing cycle into resilient growth as it’s
basically digital gold on steroids.

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

I’ve been seeing many posts about the stock market reaction to the last two Powell’s speeches at the Jackson Hole Symposium.

While it’s true that the market didn’t perform well in the following couple of months, the context today is much different.

In 2022, it goes without saying why it was different. The Fed was still in the middle of its hiking cycle and Powell delivered a very hawkish message.

In 2023, it wasn’t actually the Jackson Hole event that triggered the weakness. It was first the hot CPI on Thursday 14th and then the much more hawkish than expected FOMC on Wednesday 20th.

Even without those two catalysts in 2023, the market diverged pretty strongly from real yields and eventually it just caught up to the reality before bottoming out and resuming the rally into the December’s Fed pivot.

Right now, we are actually entering the easing cycle with resilient growth which is a strong tailwind for stocks as that should depress real yields and boost economic activity.

So, while we can’t know for sure how the market’s going to perform in the next couple of months, I’d say that this time a rally is more likely.

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