Will the Fed take a hike?
The CBI Distributive Trades Survey strengthened to 29 in August, well above a forecast of 13, and 20 last month, bolstering the outlook for consumer spending, but the data is only a short-term view. Only an hour later, the positive effect was overshadowed by the government’s presentation of no-deal contingencies. The report also negated Brexit Secretary Raab’s optimism that there would be a Brexit deal with the EU, and Sterling lost support after the New York open.
Political tensions within the Conservative Party continued amid criticism of Chancellor Hammond’s warning over the negative fiscal impact of any ‘no deal’ Brexit. Sterling failed to hold above 1.2900 and dipped to lows near 1.2800 as the Euro broke through the key 1.1000 resistance area, peaking at 1.1085. Sterling mustered a slight correction against the Dollar, but position adjustment is likely ahead of the long UK weekend.
The US Dollar sits slightly stronger today against both the Euro and the Pound as the Federal Reserve (Fed) begins their Jackson Hole conference today.
Fed member Kaplan emphasised the central bank’s independence, thus reassuring markets that the Fed will keep up the hiking pace without regard to recent Trump comments, which have hinted at the desire for a weaker USD. President Trump’s recent comments about interest rates will undoubtedly be a topic of discussion at Jackson Hole, with any comment from any Fed member regarding future rate hikes likely to impact the greenback.
US Durable Goods Orders will be the sole data release today. From the Jackson Hole Symposium, all the attention will be on the speech by the Fed’s Jerome Powell, although investors do not expect any surprises.
Yesterday was a mixed day for the Euro, with the ECB minutes not throwing up any surprises and not really having an effect on the market. The PMI figures fell to a 21-month low of 54.6, which halted any gains that the Euro was making. Bundesbank’s Weidmann gave some positive news around ending expansive monetary policy, but any reaction in the currency was curtailed by rumours that he was out of the running to succeed President Draghi.
The markets were keeping a close eye on Italian bonds, with the UK releasing a statement on Brexit, however the caution was lifted by Trump’s offer to buy the Italian debt. In terms of the data yesterday, there were no major shocks.
Today’s data includes German GDP figures, UK mortgage approvals and MPC Member Haldane’s speech – not much is expected in terms of volatility. Most of the data is expected to be overshadowed by the Fed’s Powell speech at 3 P.M.
Data to watch
06:00 EUR Gross Domestic Product w.d.a (YoY) (Q2)
06:00 EUR Gross Domestic Product (YoY) (Q2)
06:00 EUR Gross Domestic Product (QoQ) (Q2)
12:30 USD Durable Goods Orders (Jul)
12:30 USD Durable Goods Orders ex Transportation (Jul)
17:00 USD Baker Hughes US Oil Rig Count