Week of August 29

NFP employment data will be important for markets, but it's the inflation figures that are likely to be pivotal for central banks, interest rates and the path for markets over Autumn.


------------------------------


The week in review

Stock markets started the week on the back foot, but better than expected PMIs from Europe helped return a little optimism.

• Spiking electricity rates across Europe, notably in Germany dragged on the DAX, while the FTSE held up better.
• EURUSD dropped below $0.99 during the week but the battleground around parity will likely continue with $1.0100 as resistance.
• Traders took on a bit of a holding pattern ahead of the anticipated commentary out of the Jackson Hole Symposium with major US indices putting in a last-minute fight to close at least mixed.
• Brent oil climbed above $100 per barrel but it was quickly repelled as bears are trying to win the digits battle. Saudi officials were reported to have called for discussing production cuts if a new Iran nuclear deal is signed.
• Bond yields rose through the middle of the week after new US home sales dropped dramatically, with home inventories rising to highs not seen since 2009. The US 10 Year breached the 3% mark and could continue rising, depending on medium-term reaction to Jerome Powell at Jackson Hole
• Natural gas hit record highs of $10 per cubic meter despite Freeport announcing that shipping was resuming and the port would be fully operational by the end of the first quarter of next year. The Henry Hub futures price rose by 52% MoM in July, but still fell short of the massive price increases for European gas contracts.

The week ahead

Non-farm Payrolls

This week is chock-full of economic data and could see trading volume and volatility increase as summer vacations come to a close. Perhaps the biggest event is the release of NFP on Friday. USD/JPY could move as far as 140.00 or 133.00 result-dependent.

After the surprise blowout numbers of last month led primarily by the birth-death adjustment, analysts are predicting a relatively modest increase of 290K during August. The unemployment rate is expected to remain steady, keeping the focus of monetary policy on inflation.

Eurozone CPI

On Wednesday the EuroZone releases the first look at August CPI figures, which are expected to increase once again, putting more pressure on the ECB to act more forcefully when they meet next week.

PMIs and Retail Sales

Midweek has the release of final global PMI figures, starting with the official China NBS figures, projected to show another month of contraction in the manufacturing sector. The next day the private measure is expected to remain in expansion, while European PMIs are expected to repeat the better-than-expected figures seen last week.

US ISM Manufacturing is expected to decline modestly but remain in expansion (over 50). Alongside the data is the release of retail sales from most major economies, generally forecast to show weakening demand in the consumer sector when adjusted for inflation.

ADP Employment (The Return of)

After losing its reputation for being able to predict the results of NFP, a couple of months ago the ADP decided to suspend the publication of its survey in order to recalibrate its methodology. Wednesday sees the return of the measure, with analysts unwilling to offer forecasts, waiting to see if the redone survey can restore its reputation.

Other events

• Monday sees Australian retail sales. AUD/USD fell short towards 70c with 69c back in the open. Tuesday has US JOLTs job openings.
• Wednesday includes Japanese consumer confidence, German unemployment, and Canadian GDP. USD/CAD is putting in a fight around $1.3000, with 100 pips up and down making good resistance and support.
• Swiss Retail Sales come out on Thursday. USD/CHF trades comfortably below parity with 0.9800 and 0.9500 in focus.
• Friday has German trade balance data.

Earnings

A light earnings schedule still includes reports from HP, Broadcom, BestBuy, and Lululemmon.