• Mon:
  UK Market Holiday (Bank Holiday), German Ifo (Aug)
• Tue:
  CBRT Minutes, Chinese Industrial Profit (Jul), German GfK Consumer
  Sentiment (Sep)
• Wed:
  Australian CPI (Jul), Nvidia (NVDA) Earnings (Q2)
• Thu:
  Spanish Flash CPI (Aug), German State CPIs (Aug), EZ Sentiment Survey
  (Aug), US GDP (2nd) and PCE (Q2)
• Fri:
  Japanese Tokyo CPI (Aug), French Prelim CPI (Aug), German Unemployment
  (Aug), EZ Flash CPI (Aug), Italian Flash CPI (Aug), US PCE (Jul), US
  University of Michigan Final (Aug)

PBoC Delayed MLF (Mon): PBoC announced last week
that it has delayed its MLF operation and will conduct it on August 26th.
Instead of the MLF, the PBoC injected CNY 577.7bln via 7-day reverse repos,
while it added that the reverse repo operation that day was meant to counteract
maturing MLF loans, tax payments and government bond issuances. „This
would be consistent with the policy direction to gradually fade MLF as a
guidance to market rates”, said the head of FX and Rates at Oversea-Chinese
Banking Corporation. In response to Reuters asking if the central bank would
shift the timings of MLF operation, the PBoC replied “Future arrangements would
be ‘subject to the actual operation time.’” It’s worth reminding ourselves that
the delayed MLF operation does come after a series of rate cuts in July, with
market watchers suggesting the sequence of the cuts showed a change in the
framework – shifting short-term rates to be the main market-guiding signal. For
reference, China’s benchmark Loan Prime Rates were kept unchanged, as widely expected,
with the 1-year LPR maintained at 3.35% and the 5-year LPR held at 3.85%.

Chinese Industrial Profits (Tue): There are
currently no expectations for July Chinese Industrial Profits, although the
data will be watched for a prognosis of the health of China’s manufacturing
sector. In June, Chinese industrial firms‘ profits increased by 3.6% Y/Y,
accelerating from a 0.7% rise in May. Despite the recovery from last year’s
weak performance, profits remain below 2022 levels and far from the record
highs of 2021, according to Bloomberg. NBS at the time suggested the recovery
was hindered by insufficient domestic demand and a challenging international
environment. Analysts at ING said the data “recently recovered to low
single-digit growth but could begin facing some pressures again amid recent
signs of a manufacturing pullback.”

Australian CPI (Wed): Weighted CPI Y/Y is
forecast to tick lower to 3.4% from 3.8%. Desks believe the introduction of
energy rebates by the Commonwealth, Queensland, and Western Australia
governments in July is anticipated to lower electricity bills, with Westpac
predicting a 32% drop in electricity prices for the month – and in turn a
Weighted CPI print of 2.9% – below the market forecast. The Desk says “When
combined with a -2.3%mth fall in auto fuel and flat food, this should see a
-0.6%mth decline in the July Monthly CPI Indicator with the annual pace
dropping sharply from 3.8%yr to 2.9%yr”. From an RBA perspective, the data will
be keenly watched given the recent hawkish tones from the central bank. As a
reminder, the most recent RBA Minutes from the August 5th-6th meeting stated
the board considered the case to raise rates and decided a steady outcome
better balanced the risks and added it is possible cash rate would have to stay
steady for an extended period. RBA Governor Bullock stuck to a hawkish tone at
the post-meeting press conference in which she noted that the board considered
a rate increase and that a cut is not on the near-term agenda, while she also
stated that they are ready to raise rates if needed and that the pricing of
cuts for the next six months does not align with the board.

Nvidia Earnings (Wed): The consensus expects
Nvidia to report EPS of 0.63 per share, on revenues of USD 28.35bln. The tech
giant is expected to guide Q3 EPS at 0.69 and Q3 revenue at 31.18bln. For the
full year, Nvidia is expected to guide EPS around 2.70, and revenue of USD
120.14bln. Analysts generally expect Nvidia’s upcoming earnings report to show
strong results due to sustained AI demand, however, there is a little caution
due to potential production delays. Oppenheimer anticipates strong Q2 results
and positive Q3 outlook, driven by datacentre growth. HSBC and Stifel predict
continued strength, despite concerns about potential delays in the Blackwell
series. Susquehanna expects robust results, but notes risks from possible
delays in the GB200. Wells Fargo is focused on long-term growth, especially
from Blackwell and software monetisation, while Barclays highlights
stronger-than-expected supply chain metrics and increased datacentre revenue
forecasts. According to Refinitiv’s data, analysts currently rate Nvidia’s
stock as a Buy, with an average price target of USD 137.41/shr.

Japanese Tokyo CPI (Fri): The release is
typically used as a preview for the mainland metrics released a couple of weeks
after. Core Tokyo CPI is seen remaining at 2.2%, whilst headline CPI is seen
cooling to 1.9% from 2.2% – primarily due to the government’s temporary energy
subsidy program. “However, service sector prices are likely to grow at a faster
pace than in the previous month due to strong wage growth”, according to ING.
The data comes in the context of BoJ normalisation. BoJ Governor Ueda said at
Friday’s parliamentary testimonies that economic indicators released after the
July rate hike, including Q2 GDP and wage data, confirmed the economy was
moving in line with BoJ’s outlook and therefore, the July decision was
appropriate. He added there is no change to the stance that they would adjust
the degree of monetary easing if the price outlook is likely to be achieved.

EZ Flash CPI (Fri): Expectations are for
headline HICP to have pulled back to 2.2% Y/Y in August from 2.6% in July, with
the super-core metric seen pulling back to 2.8% Y/Y from 2.9%. The prior
release saw an uptick in the headline rate to 2.6% Y/Y from 2.5%, with the
increase driven by an uptick in energy inflation. Elsewhere, the widely-watched
services component ticked lower to 4.0% Y/Y from 4.1%. This time around,
analysts at Investec “are pencilling a drop in the headline measure of
inflation to 2.3% Y/Y. This is related to energy given the 4.9% fall in oil
prices in the month and a positive base effect from utility prices”. Its
analysts look for services inflation to remain “sticky” and “do not expect to
see a sustained improvement in until wage growth eases more materially.” As a
reminder, regional releases ahead of the Eurozone-wide metric will give traders
insight into what to expect for Friday’s release. From a policy perspective, a
September rate cut is fully priced with greater interest over how the rate
cutting cycle will proceed thereafter with a total of 64bps of easing seen by
year-end which implies two 25bps rate cuts, and a 56% chance of another 25bps
reduction.

US PCE (Fri): The consensus looks for headline
PCE to rise +0.2% M/M in July (prev. +0.1%). Writing after the release of CPI
and PPI data, WSJ’s Nick Timiraos said forecasters who translate the CPI and
PPI into the PCE expect core prices rose 0.16% M/M in July – which would be
0.2% M/M rounded, matching the June metric. Timiraos added that this would hold
the 12-month rate steady at 2.7% Y/Y, the six-month annualised rate would fall
to 2.7% from 3.4% in June, and the three-month annualised rate would fall to 1.9%
from 2.3%. Capital Economics says the CPI and PPI data show a firm
disinflationary trend, and supports the case for the Fed to cut rates by 25bps
in September, despite a potential slight annual increase in core PCE inflation.
It said that while some categories, like rent and motor vehicle insurance,
showed higher prices, the data overall suggests that inflationary pressures are
moderating, but not enough to justify a larger cut. Analysts are generally of
the view that the Fed will firm its view after seeing the August jobs report
(due September 6th).

Australian Retail Sales (FRI): Retail Sales data
for July is seen ticking lower to 0.2% from 0.5%. The report will provide the
first official data on the impact of the “stage 3” tax cuts on consumer
spending introduced in July. Westpac’s Card Tracker suggests that consumers are
mostly saving their income gains, resulting in only a modest increase in
spending. Westpac however forecasts the print at 0.8% – above market consensus
– “On balance we expect retail sales to post a 0.8% gain in July, likely to be
viewed as a subdued result given the context [of tax relief]”, the desk says.

This article originally appeared on Newsquawk.

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

IMF chief economist Pierre-Olivier Gourinchas spoke in an interview with Reuters at the Jackson Hole annual economic symposium on Friday. Saud the BoJ can continue to raise rates gradually, a ‚data dependent‘ pace:

• inflation is higher than the Bank’s 2% target
• inflation expectations have started to move „maybe even a little bit above“ that target
• BOJ’s beginning to normalise monetary policy is „certainly something that we think is a good development for Japan“

Gourinchas also weighed in with his two cents on the market volatility:

• „I think the market overreacted,“
• „… we could see other episodes of market volatility“ due to rate cuts from many central banks while the BOJ begins to raise rates

—

I don’t know how much attention the Bank of Japan will give his opinions. I suspect not much.

He’s right about more volatility to come at least. With Federal Reserve Chair Powell confirming a September rate cut:

• Forexlive Americas FX news wrap: USD falls as Powell pleges „everything we can“ for jobs

And the BoJ hiking, plenty more to come.

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

• Powell at Jackson Hole: The time has come for policy to adjust
• BOE’s Bailey: Market events like two weeks ago will happen, test is whether more triggered
• Fed’s Goolsbee: We want to be careful about the employment side of the mandate
• Goolsbee: The size of Fed cuts isn’t important, it’s the path
• ECB’s Rehn: European growth outlook is looking somewhat weaker than the US
• Canada June retail sales –0.3% vs -0.3% expected
• US new home sales for July 0.739M vs 0.625M expected
• Fed’s Bostic estimates long-run Fed rate at 3%
• Fed’s Bostic: We want a calm, orderly return to normalization
• ECB sources: Broad support starting to form over Sept rate cut

Markets:

• NZD leads, USD lags
• WTI crude up $1.91 to $74.92
• US 10-year yields down 6.5 bps to 3.79%
• Gold up $28 to $2510
• S&P 500 up 1.1%

Powell’s Jackson Hole speech had plenty of hype and often that leads to a let-down but that certainly wasn’t the case this time. Most expected him to at least hint at a rate cut but he laid it out explicitly and then layered on a comment saying the Fed „will do everything we can to support a strong labor market.“

Also notable was what that speech didn’t include and that was a nod to moving gradually or anything along those lines. That means Powell wants to keep his options open around 50 bps either now or later.

In short, he managed to out-dove himself despite a high bar and the market reaction was strong. The US dollar fell hard across the board in a move that sustained itself throughout the day with few pullbacks.

There was some angst about Powell yesterday and that led to USD buying but those moves were wiped out in the initial round of USD moves followed by an extension later.

It was all orderly but I’m going to be carefully watching USD/JPY in Asia-Pac trading at the open. That pair fell nearly 200 pips and finished with the lowest close since January. There’s still 270 pips until the intraday squeeze low from August but those left in the carry trade could be feeling the pinch and there could be another rush to the exits.

Have a great weekend.

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

Powell offered a lift to US stock markets but there was some mid-day angst along with signs of sector rotation into pro-cyclical small caps.

Closing changes on the day:

• S&P 500 +1.2%
• Nasdaq Comp +1.5%
• DJIA +1.2%
• Russell 2000 +3.1%
• Toronto TSX Comp +1.1% (record high)

On the week:

• S&P 500 +1.4%
• Nasdaq Comp +1.4%
• DJIA +1.3%
• Russell 2000 +3.4%
• Toronto TSX Comp +4.1%

The S&P 500 is now just 0.6% away from the all-time high.

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

Bitcoin has been lagging in the recovery from the broad market rout in the start of August, in part because of worries about the sale of Mt. Gox bitcoin. But it’s making up for lost time today, rallying nearly 5% and trading at a session high.

The daily chart has a nice look as it breaks out of two weeks of consolidation to the upside with not much standing in the way of $68,000.

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

The great stock market turnaround in August was impressive in many ways but when I take a step back, there was one big question being asked and answered: Is the Fed behind the curve?

Within that question is a set of assumptions about the US economy and if you look at the economic data, there was cause for concern. The ISM services index in June fell to the lowest since 2020, global commodity prices have been falling and US unemployment has been rising.

A big boost for US stocks came on strong retail sales data but when I survey the picture of US data over the past two months, there’s no clear trend. What was clear though was corporate America.

Scotia here highlights how rarely ‚recession‘ was mentioned on earnings calls:

„So far we aren’t experiencing a weaker consumer
overall,“ said Walmart’s CEO. That was backed up by Target and many others.

For sure, there were some pockets of weakness like McDonald’s an anything housing-related but those are looking like outliers. McDonald’s has been getting pushback on pricing (and did say there was a strong response to $5 meals) and housing is very rate-sensitive.

What emerges is a picture of a consumer that’s picky about pricing but not in a recessionary mindset, at least not yet.

On earnings overall, it was a positive picture, according to Scotia:

The U.S. Q2 reporting season is essentially over
with 95% of companies having reported. S&P 500 Q2 EPS is coming in at US$59.86, which is better
than the US$58.64 expected at the start of the reporting season. See Exhibit 3. The beat propelled
the earnings growth rate up to 11% y/y vs. expectations of 9% when the reporting season started.
At the company level, the median earnings beat was 4.4%, which is only slightly below the last two-
year average of 4.6%, but above the five-year pre-pandemic average of 3.8%. Harder to manipulate,
the top line also exceeded expectations, rising +5.7% y/y, the best reading since the final quarter of
2022, as 60% of companies topped Wall Street forecasts. Lastly, the percentage of sectors reporting
a y/y earnings decline was stable at 27% (three reported an EPS decline), but well below levels
registered in 2022 when more than half of sectors suffered earnings contraction.

On top of that:

• Wall Street hasn’t trimmed earnings more than usual going forward
• Revenue forecasts today are slighly above June levels for both 2024 and 2025
• Few one-time charges, impairments or no-cash expenses, which points to earnings quality

Scotia sums it up nicely: „If a steep US macro downturn has indeed started, it’s not yet showing up in
earnings numbers (actual or expected).“

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

Headlines:

• Preview: What to expect from Powell at Jackson Hole
• From angst to relief for US equities?
• GBP/USD lingers near the 2023 high as buyers hope for a breakout to end the week
• France August business confidence 97 vs 94 prior
• BOJ governor Ueda reaffirms closely watching market moves with high sense of urgency
• BOJ governor Ueda: Markets remain unstable, moves have been volatile
• BOJ governor Ueda plays down any differing policy stance with deputy governor Uchida
• Japan finance minister says FX intervention in July was effective
• ECB’s Kazāks: No reason now not to follow through on projection for rate cuts

Markets:

• AUD leads, USD and CHF lag on the day
• European equities higher; S&P 500 futures up 0.5%
• US 10-year yields down 1.4 bps to 3.848%
• Gold up 0.6% to $2,498.53
• WTI crude up 1.3% to $73.96
• Bitcoin up 0.2% to $60,781

It was a quieter session with little in terms of market news flowing through. All eyes are on Fed chair Powell’s appearance later in Jackson Hole and that is captivating the attention of market players for now.

The dollar is somewhat sluggish again today, after having recovered a little in trading yesterday. On the week itself, it remains vulnerable to further declines across the board.

USD/JPY was an active pair in Asia amid remarks from BOJ governor Ueda in a parliamentary hearing. But the pair stuck around 145.60-10 in European morning trade, now down just 0.1% at 146.05.

Besides that, the dollar is leaning on the softer side against the higher beta currencies. GBP/USD is up 0.3% to 1.3125 and eyeing its 2023 high while AUD/USD is up 0.4% to 0.6730 on the day.

That comes as equities are in a more cheerful mood, after getting checked back a little in trading yesterday. S&P 500 futures are up 0.5% as investors are turning angst to relief ahead of Powell’s remarks later.

If you’ll be in Sydney next week, do drop by and give a hello as Eamonn and myself will be at the Finance Magnates Pacific Summit from 27 to 29 August. The attendance is free and I’ll be presenting on how one can approach trading just as you would picking up a sport. Have a great weekend, everyone!

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

It’s been fairly one way traffic for equities since Asia trading. S&P 500 futures were lightly changed earlier in the day but are now up by roughly 0.5% ahead of US trading. Wall Street opened higher yesterday but surrendered gains during the session to close modestly lower. It can be argued that there was some pre-Powell angst perhaps but that looks to be clearing up now.

So, what exactly can we expect from the Fed chair later?

I won’t expect him to rock the boat amid fears of stirring up another volatility bout in markets. As such, it is likely that Powell should just reaffirm that they are looking to cut rates next month. But whether it be 25 bps or 50 bps, that is something that he won’t pre-commit to surely.

In other words, Powell will try to play it safe. The question is, will markets sense some relief for that? Or are they going to kick and scream again to force a 50 bps move? The current pricing shows that the odds of a 50 bps rate cut are priced at ~26%. So, there is some backpedaling to do there if the Fed doesn’t deliver.

That being said, there was no issue for risk trades when we went back from six rate cuts at the end of last year to just one by May. So, what’s a quarter pricing extra of 25 bps eh?

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

The pound has quietly been an outperformer among the major currencies in trading this year. Amid a more resilient economy and stickier inflation, the BOE has seen their rate cut plans pushed back. And that has helped to underpin the currency as most other major central banks are on track to cut rates further.

The latest to fall in that domino is the dollar, having endured a rather punishing last two weeks. In turn, GBP/USD has made significant progress in a push from 1.2800 to now above 1.3100.

And as we look to close out the week, buyers are taking aim at the 2023 high of 1.3142 currently.

Another notable development in August is that we are seeing price push above its 100-month moving average of 1.2926. GBP/USD has had a long history of struggle against its key monthly moving averages, stretching all the way back to 2008. And so, a firm break here could very well open up scope for a stronger upside push alongside the other technical levels highlighted above.

At the end of the day, it all comes down to the divergence between the BOE and Fed. And of course how quickly things will narrow once inflation pressures in the UK begins to come under control.

But with the dollar stumbling across multiple charts, it’s tough to argue against a softer backdrop for the US currency – at least for now.

All eyes will be on Fed chair Powell next to see if he will deliver another blow to the greenback before the weekend.

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

As the dollar bounced back a little, gold fell by 1% and more importantly back under the $2,500 mark. Price is still keeping above the previous triple top pattern around $2,480 but buyers will be hoping to clinch a more convincing push above the figure level to solidify the breakout status.

Instead, price action focus now turns towards the near-term chart as seen above.

The drop under $2,500 sees gold move back to test its 200-hour moving average (blue line) and buyers are holding for now. Keep above that and buyers will still be in it with a shout as we look to close out the week. But break below and sellers will start to resume near-term control for the first time since the start of August.

Fed chair Powell’s appearance is the key risk event to watch in the day ahead. That will matter for both dollar and bond market sentiment.

As such, gold will have to work with the reaction to that to wrap things up this week. For now, price action is sitting in a more neutral spot in the near-term. That considering we are seeing price trade back in between its 100 (red line) and 200-hour moving averages. And also with the $2,500 level in focus too.

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