Week of AUGUST 19th

Last week, US CPI and retail sales reassured investors, showing that inflation was slowing while economic activity remained strong, which helped renew investor sentiment as a series of weaker-than-expected UK data reinforced the likelihood that the BOE will take further action to stimulate the economy.

This week, attention will centre on the Federal Reserve minutes from the last FOMC meeting ahead of the high-profile Jackson Hole Symposium later in the week.​

Week in Review

Last week saw a generally more positive sentiment in global equity markets as fears of a US recession eased and data supported the Fed's interest rate cut in September. A key event was the release of the CPI figures, which matched expectations for monthly and annual rates of 2.9% - the lowest since early 2021. However, a slight rise in services costs created uncertainty over whether the expected 50 basis point cut would come in September or later. US PPI data also softened beyond forecasts, affirming the easing narrative, while retail sales were stronger than projected, showing economic resilience.

UK jobs numbers presented a mixed picture, with the July claimant count jumping to 135000 - the highest since the pandemic (excluding pandemic figures, the worst result since the global financial crisis) and the claimant rate increasing to 4.7%. However, the 3-month unemployment rate fell to 4.2% versus the projected 4.5%. UK inflation came in below estimates, with both headline and core rates 0.1% lower at 2.2% and 3.3%, respectively. Services PMI showed the slowest growth since May 2022, paving the way for a more relaxed policy stance. In the second quarter, UK GDP expanded by 0.6%, matching forecasts, with June's monthly growth flat as anticipated.

In other economic data, New Zealand's central bank unexpectedly lowered interest rates but maintained hawkish guidance that tight policy is still needed until inflation nears the target. Eurozone June industrial production disappointed with annual growth of -3.9% versus -2.9% forecasted. Japan's preliminary second-quarter GDP surpassed expectations at 0.8% growth against the 0.6% projected.

In geo-politics, Japanese Prime Minister Fumio Kishida announced he would not seek re-election as head of the ruling party, opening the way for a new government leader in September. Thailand elected Paetongtarn Shinawatra as Prime Minister after dismissing Srettha Thavisin for ethics violations. Expected retaliation from Iran and Hezbollah against Israel continued to be delayed as negotiators in Qatar said military action could be postponed during hostage release talks in Gaza.​

Biggest Marker Movers

• USDJPY rose over 1% as carry trading activities resumed, experiencing a notable increase on Thursday in light of data showing the ongoing resilience of the US consumer.
• Crude oil prices experienced a brief 4%+ surge following OPEC's monthly report, which suggested slowing demand in China but then trended lower due to an unexpected build-up in US inventories.
• The Japanese Nikkei index continued soaring and recovered all losses experienced since the sharp decline on August 5.
• Gold prices briefly rose to a new record high following the release of US inflation data but failed to maintain $2500 per ounce by the end of trading.​

Top Events in the Week Ahead

The economic calendar in the coming week is relatively sparse, giving more weight to the Jackson Hole Symposium countdown. The event will be closely watched as it is often an opportunity for the central bank to announce shifts in policy, such as the last time it moved to hike interest rates and pushed them to their current level.

All Eyes on Jackson Hole Symposium

Investors will look closely at FedChair Jerome Powell's speech on Friday for any clear indications that the Fed will cut rates at its September meeting, as is already universally expected. Other Fed speakers will also be closely watched as they give speeches at the same venue on Wednesday and Thursday.

Before that, however, is the release of the FOMC minutes from the July meeting that left markets disappointed there was no sign of easing. Traders will look for signs of dovishness in the members' comments that did not come through in the policy summary provided at the time.

Gold could push to new records should it maintain support by $2400 per ounce.

Inflation and PMIs in Focus

Inflation will be in focus for Canada and Japan outside the US. Canadian CPI is expected to remain largely unchanged as the BOC remains on an easing path. Japan's inflation figures on Friday will be watched after the BOJ essentially promised not to raise rates in the short term, and the economy came in stronger than expected. Inflation is seen accelerating away from the target rate to 2.9% from 2.8%, with the "core-core" rate also picking up the pace to 2.3% from 2.2%. The CADJPY pair could slowly move towards 110 once again unless support at 107 opens the door to lower price levels.

Thursday's release of preliminary PMI figures from key economies is likely to focus on the Eurozone, which has been underperforming expectations as unemployment rises. Manufacturing is expected to remain soundly in contraction, with services in expansion enough to pull the composite above 50.​ EURUSD bulls might reattempt to retake the 1.10 handle but still face resistance at 1.107.

Other Events & Earnings

On Monday, machinery order data for Japan is scheduled. Tuesday may include the most recent RBA meeting minutes and China's loan prime rate decision. Wednesday should see Japan's trade balance statistics. The ECB is poised to publish minutes from Thursday's latest monetary policy meeting. To end the week, UK consumer confidence data from GfK is expected on Friday.

While most of the second-quarter earnings season has passed, some notable companies, including Palo Alto Networks, Antofagasta, John Wood Group, Lowe's, TJX, Target, Intuit, and Ubiquiti, still plan to disclose earning results.