Week of August 26

Last week, market participants closely watched the Jackson Hole Symposium and FOMC minutes.

This coming week is expected to be less eventful, with inflation figures from both the US and Eurozone being the key economic indicators to watch.​

Week in Review

Markets were largely unchanged over the week as focus turned to Fed Chair Jerome Powell's speech at the Jackson Hole Symposium, expecting him to reinforce plans to ease monetary policy further this year. The more dovish than anticipated FOMC minutes released on Wednesday supported this view, revealing some members advocated for interest rate cuts.

The US Bureau of Labour Statistics (BLS) significantly revised down its job creation estimates for the period until March 2024, the largest downward change since the global financial crisis. It reported that 818,000 fewer jobs were created than initially reported, which exclusively affected private-sector employment.

BOJ Governor Kazuo Ueda addressed Parliament as requested to explain the central bank's unexpected actions in July that preceded a sharp fall in markets. While blaming concerns over the US economy, he affirmed the interest rate rise but noted future policy was uncertain. Japan's trade deficit for the month was ¥622 billion, much worse than the forecasted ¥350 billion.

Flash PMI data showed slow economic activity in most European countries, except France, where services grew due to the Paris Olympics. UK preliminary figures continued expanding as anticipated.

Minutes from the RBA meeting suggested interest rates are unlikely to fall soon and a rate hike is possible if inflation risks increase. ECB's Olli Rehn advocated another September rate cut for the shared Eurozone, citing growth risks.

Foreign direct investment (FDI) in China accelerated its seventh consecutive monthly decline amid government promises to support the economy directly.

In geopolitics, US Vice President Kamala Harris accepted the Democratic nomination for president without specific policy plans, while reports indicated Israel and Hamas neared but did not finalise a ceasefire agreement.​

Biggest Movers

• Gold opened at a record high above $2,500 per ounce at the start of the week and continued to rise over the next couple of days until it reversed on Thursday as yields on US government bonds began to rise.
• The Japanese yen strengthened mid-week in anticipation of important evidence from Governor Ueda to Parliament.
• Expectations that the Fed would pursue looser policy led to a generally weaker US dollar over the week, falling to an 8-month low versus the euro on Tuesday before a modest recovery.
• The British pound posted consecutive gains against the greenback, aided by a weaker dollar and upbeat Manufacturing and Services PMIs

Top Events in the Week Ahead

There are relatively few significant economic events this coming week, especially at the start. As the UK has a public holiday on Monday, the key themes will be inflation indicators released on Thursday and Friday.

US PCE in Focus

The PCE index will take centre stage, the Fed's preferred consumer price change measure. The monthly PCE price index is anticipated to see a modest increase to 0.2% from 0.1%. However, markets will likely pay the most attention to annual core PCE, which is forecast to remain at 2.6% and keep the Fed on course for possible interest rate reductions in September. Gold could achieve new heights or descend toward $2430 per ounce.

Before this, the Eurozone will publish preliminary inflation data for August starting on Thursday, beginning with figures for each German state. By the time data for North Rhine-Westphalia, the largest state, is released, the market has already determined how the overall data will develop. That is unless a major deviation emerges from Germany's trend. Inflation is expected to continue moderating overall, slowing most in the Eurozone's largest economy and leaving the ECB also on track to ease in September potentially. The EURUSD count may continue to ascend if support at 1.10 holds firm, aiming for 1.12 and beyond.

Economic Indicators Under Review

Following the sudden market adjustment in early August, market participants have renewed their focus on indicators of economic health, particularly from the United States. Durable goods orders from the US on Monday may attract attention if disappointing, as this could provide further evidence of slowing in the American economy. The US will also deliver a second estimate of its Q2 GDP, and a downward revision from the initial 2.8% flash figure could heighten market concerns. Conversely, an upward revision may contribute to positive sentiment from anticipated easing.

China will release its official PMI readings on Saturday, and manufacturing is expected to continue contracting.

Canada will also announce its Q2 GDP results, forecast to modestly improve to a quarterly growth rate of 0.5% from the previous 0.4%.​ All this is while USDCAD battles with the 200-Day MA near 1.36.

Other Events and Earnings

German business sentiment data, measured by the Ifo index, will be published on Monday. The Conference Board's consumer confidence report for the United States is due on Tuesday. German consumer confidence from GfK is scheduled for Wednesday. The Eurozone economic sentiment indicator will be released on Thursday. Friday will include unemployment and consumer confidence numbers for Japan.

This week, corporate updates are relatively light as the summer holiday period is underway. However, a small number of companies, such as Heico, Nvidia, Salesforce, Dell, Marvell, and Autodesk, are nonetheless scheduled to report to investors.​