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The annual Jackson Hole Economic Symposium is scheduled for August 25-27. Fed Chair Jerome Powell could use his speech to double down on the hawkish stance. US dollar set to rock on Powell’s pivot predictions on policy tightening as inflation rages on. The US dollar made another attempt to take on the two-decade peak heading into the Jackson Hole  Symposium, which is crucial for the market’s pricing of the Fed’s rate hike expectations in the coming months. Will Fed Chair Jerome Powell’s speech provide additional legs to the dollar rally? Jackson Hole Economic Symposium: Overview The Federal Reserve Bank (Fed) of Kansas City has been organizing an annual economic policy symposium in Jackson Hole, Wyoming, since 1978. The Kansas City Fed hosts a number of central bankers, academics and economists from all around the world and central bankers have taken the opportunity to direct their monetary policy at this Summit. It’s worth mentioning that in 2020, Powell announced the incorporation of the new average inflation targeting (AIT) framework into the Fed's forecasts. This year’s event  is held from August 25 to August 27, with the main theme centered on “Reassessing Constraints on the Economy and Policy.”  What to expect from… Read More »Jackson Hole Symposium Preview: Will Powell power dollar bulls?

EUR/USD regains some positive traction on Thursday amid a modest USD downtick. Signs of stability in the financial markets seem to weigh on the safe-haven greenback. Hawkish Fed expectations, elevated US bond yields should limit losses for the buck. Worries about an energy crisis in Europe should cap gains ahead of German/US GDP. The EUR/USD pair witnessed good two-way price moves on Wednesday and finally settled nearly unchanged for the day. In the absence of any major market-moving economic releases from the Eurozone, the shared currency continues to be weighed down by worries about a deeper economic downturn. Natural gas and electricity prices have spiralled higher in recent weeks to record highs, raising concerns about an extreme energy crisis in Europe. This has been fueling speculations that the region's economy could drop faster and deeper into a recession over the coming months. Apart from this, strong intraday US dollar buying exerted some downward pressure on the major. Tuesday's knee-jerk reaction to the dismal US PMI prints and weak US home sales data turned out to be short-lived amid expectations that the Fed would stick to its policy tightening path. The bets were reaffirmed by hawkish remarks from Minneapolis Fed President… Read More »EUR/USD Outlook: Corrective bounce is likely to remain capped amid gas crisis, hawkish Fed

EUR/USD: It was a subdued session for EUR/USD—as well as other major currency pairs—on Wednesday as investors brace for the beginning of the Jackson Hole Symposium, held for three days. We also look forward to the US Q2 GDP print today, although it is expected to remain unchanged at -0.9 per cent. The technical environment on the bigger picture remains toying with support: weekly support in the shape of a 1.272% Fibonacci projection at $0.9925 (alternate AB=CD bullish formation), a daily support coming in from $0.9919, and the daily chart’s relative strength index (RSI) shaking hands with indicator trendline resistance-turned-support (drawn from the high 58.91), situated just ahead of oversold territory. While the noted supports offer technical confluence, direction in this market continues to favour sellers. The currency pair has chalked up a dominant primary bear trend since pencilling in a top around $1.2350 in early 2021. Secondary trends, as you can see, have been short-lived, though provided willing sellers ample opportunity to get involved. If the weekly timeframe steps under $0.9925, limited (obvious) support is not visible until $0.9606, while the daily timeframe’s downside support target rests at $0.9668 (Quasimodo support). Meanwhile on the H4 timeframe, buyers and sellers… Read More »Focus turns to Jackson Hole

The annual Jackson Hole Economic Symposium is scheduled for August 25-27. Fed Chair Jerome Powell could use his speech to double down on the hawkish stance. US dollar set to rock on Powell’s pivot predictions on policy tightening as inflation rages on. The US dollar made another attempt to take on the two-decade peak heading into the Jackson Hole  Symposium, which is crucial for the market’s pricing of the Fed’s rate hike expectations in the coming months. Will Fed Chair Jerome Powell’s speech provide additional legs to the dollar rally? Jackson Hole Economic Symposium: Overview The Federal Reserve Bank (Fed) of Kansas City has been organizing an annual economic policy symposium in Jackson Hole, Wyoming, since 1978. The Kansas City Fed hosts a number of central bankers, academics and economists from all around the world and central bankers have taken the opportunity to direct their monetary policy at this Summit. It’s worth mentioning that in 2020, Powell announced the incorporation of the new average inflation targeting (AIT) framework into the Fed's forecasts. This year’s event  is held from August 25 to August 27, with the main theme centered on “Reassessing Constraints on the Economy and Policy.”  What to expect from… Read More »Jackson Hole Symposium Preview: Will Powell power dollar bulls?

EUR/USD – 0.9962 Euro's break of July's 0.9953 low to a fresh 20-year trough of 0.9927 Monday confirms long term downtrend has resumed and despite staging a strong rebound from 0.9001 (Europe) to 1.0018 in New York yesterday, subsequent retreat has retained daily bearishness and below 0.9901 would yield 0.9868. On the upside, only a daily close above 1.0018 would risk stronger retracement of recent decline towards 1.0046, break, 1.0070/80. Data to be released on Wednesday U.S. MBA mortgage application, durable goods, durables ex-transport, durables ex-defense and pending home sales.

The S&P US Composite PMI™ shows a steep decline in business activity in August. Global Flash PMI courtesy of S&P. Yellow highlights and dashed line added.  Faster Fall in US Private Sector Output Amid Weak Client Demand The S&P reports a Faster Fall in US Private Sector Output Amid Weak Client Demand Flash US PMI Composite Output Index at 45.0 (July: 47.7). 27-month low. Flash US Services Business Activity Index at 44.1 (July: 47.3). 27-month low. Flash US Manufacturing Output Index at 49.3 (July: 49.5). 26-month low. Flash US Manufacturing PMI at 51.3 (July: 52.2) 25-month low. Sharp Decline  US private sector firms signaled a sharper fall in business activity during August, according to latest ‘flash’ PMI™ data from S&P Global. The decrease in output was the fastest seen since May 2020 and solid overall. The rate of contraction also outpaced anything recorded outside of the initial pandemic outbreak since the series began nearly 13- years ago.   Though modest, the drop in new orders was the sharpest in over two years. New sales were weighed down by weak domestic and foreign client demand, as new export orders fell further and at a solid pace.    The rate of input cost inflation eased for… Read More »Recession evidence piles up with S&P PMI Services leading the way

EUR/USD – 1.0032 Euro's recent decline from August's 1.0368 peak to a 1-month low of 1.0033 in New York last Friday due to broad-based usd's strength in tandem with rally in U.S. yields suggests re-test of July's 20-year bottom at 0.9953 would be seen later today or tomorrow before prospect of minor recovery. On the upside, only a daily close abovw 1.0095 would risk retracement towards 1.0123. Data to be released today U.S. national activity index and Canada new housing price index on Monday.

Europe After four weeks of gains, European markets appear to have run out of puff this week, spooked in some part perhaps by the big jumps in inflation we’ve seen in UK CPI this week, as well as this morning’s eye-watering surge in German PPI for July.   This has been another week that has seen European and UK gas prices trade at record highs, and the penny appears to have dropped that central banks’ are likely to have to go much harder on rates if they are to have any chance of getting on top of the inflation genie.   The FTSE100 is outperforming largely due to the weakness of the pound which is helping the big US dollar earners on the index, as well as a strong showing from the more defensive areas of the index, notably health care and GSK and AstraZeneca. With Just Eat shares down at 5-year lows and down over 80% from their October peaks last year the air has been slowly coming out of the online delivery sector, as higher costs and more competition eat into its margins. In April the company announced that it was considering offloading its US GrubHub business, less… Read More »Rising inflation and rate hike bets push US dollar and yields higher

The equity rally ran out of steam on Friday as options-related selling hit. Momentum also stalled as investor sentiment moved to more neutral readings. Short covering also slowed the latest data showed. The equity rally ran out of steam on Friday with all main indices closing in the red. The S&P 500 finished down a little over 1% while the Nasdaq lost close to 2%. The major forces at play were a stall in recent short covering and equity purchases from fund managers and hedge funds as well as a shift in sentiment readings from overly bearish to neutral. The rally has led to some strong gains across the big tech space and investors began to once more reassess the valuations. Yields have remained pretty calm which helped the rally but bets were also removed following the release of the Fed minutes and upcoming symposium at Jackson Hole.  Oil prices have continued to remain under pressure as fears over a global slowdown weigh as well as a surprising large drag from US inventories last week. Bitcoin too came under pressure as the risk-off narrative hit one of the more speculative risk assets. Bitcoin fell 10% on Friday and is now down… Read More »Week Ahead on Wall Street (SPY) (QQQ): Rally stalls as meme stocks crater and Tesla goes to $300 or lower

Macroeconomic indicators this week pointed to further headwinds for the global economy. In the US, the New York Empire Manufacturing Index slumped to -31.3 (from 11.1) in August, the lowest level since slump after the first Covid-19 lockdown. The sharp drop was driven by weaker current conditions, while the expectations index improved slightly. The current Empire level implies US Manufacturing PMI clearly below 50, in line with what the new orders index predicted already in July. Also in Europe, there were weak indicators with the German ZEW expectations diving further during August to the lowest level since October 2008. The ZEW signals further declines in PMI ahead and increasing recession risk in the German economy, which is also our base case for the second half of this year, see Research Germany – Zeitenwende, 25 July. Our forward looking macroeconomic model, Macroscope, this week also pointed to further weakening momentum in the global economy across regions over the next six months, 18 August. On the inflation front, UK CPI inflation surprised to the upside creeping above 10% in July. The UK is thereby joining the “club” of countries, mostly in Eastern Europe and emerging markets, with double digit inflation rate. We think… Read More »UK joins the “10% inflation club”