Eyes on Jackson Hole

23 Aug

Posted by RVR Ventures In Analysis 0 comment

While investors will continue monitoring upcoming economic data, including home sales and personal spending, what they’re really looking forward to is the Fed’s annual symposium at Jackson Hole which usually takes place in person, but because of rising COVID cases in the US and worldwide, will this year take place online. It begins at the end of the week.

This much-anticipated event could serve as a game changer for markets. If the US central bank reinforces the message that it is nearing an end to tapering by reducing bond purchases, as indicated in last week’s FOMC minutes, a full-blown selloff could result. On the other hand, if the Federal Reserve provides another erudite flip-flop, ultimately flagging it will continue to delay tightening, an additional rally could ensue. The Fed has gone back on its policy rhetoric before, so it wouldn’t entirely surprise us if they do so again

Here are the key market moving factors for the week:

The US

The latest FOMC meeting minutes signaled that a majority of Fed members support an idea to scale back the $120 billion per month in asset purchases by the end of this year. Fed Chair Jerome Powell’s speech on Friday may strengthen this prospect, although recent economic data has shown signs of a slowing recovery.
Against this backdrop, the DXY US Dollar index advanced to an eight-month high as market participants attempted to price in tightened liquidity conditions towards the end of the year. As a result, gold prices faced strong resistance to moving up despite escalating geopolitical tensions in Afghanistan.
The safe-haven dollar traded near its highest in more than nine months against major peers on Monday, while commodity currencies like the Aussie languished amid worries that the Delta coronavirus variant could derail the global economic recovery.
The dollar index, which measures the currency against six peers, was little changed at 93.468 from Friday, when it climbed as high as 93.734 for the first time since Nov. 4.

The UK

Prime Minister Boris Johnson said on Friday Britain would work with the Taliban if necessary after
the militants capture of Afghanistan, and defended his foreign minister who has come under fire for his handling of the situation.
“What I want to assure people is that our political and diplomatic efforts to find a solution for Afghanistan, working
with the Taliban, of course, if necessary, will go on,” Johnson told media.
Johnson said the situation at Kabul airport, where thousands of desperate Afghans have thronged seeking exodus from the country, was getting “slightly better”.

Europe

The European Union has not recognised the Taliban, EU Commission President Ursula von der Leyen said on Saturday, nor is it holding political talks with the terrorists, a week after they seized control of Afghanistan.
The Taliban completed a lightning takeover of Afghanistan on Sunday, walking into the capital Kabul without firing a shot.
The head of the EU executive spoke after visiting a reception centre in Madrid for Afghan employees of EU institutions evacuated from Kabul.

AUSTRALIA

The manufacturing sector in Australia continued to expand in August, albeit at a much slower rate, the latest survey from Markit Economics showed on Monday with a 14-month low manufacturing PMI score of 51.7.
That’s down from 56.9 in July, although it remains above the boom-or-bust line of 50 that separates expansion from contraction.
New orders and output both fell into contraction territory, ending the 13-month growth streaks across both indices. While the lingering disruptions from the COVID-19 pandemic affected both demand and production, firms also reported that supply issues had constrained output. Indeed, suppliers’ delivery times continued to lengthen, and at the most severe pace since April 2020.

JAPAN

The manufacturing sector in Japan continued to expand in August, albeit at a slower rate, the latest survey from Jibun Bank showed on Monday with a manufacturing PMI score of 52.4.
That’s down from 53.0 in July, although it remains above the boom-or-bust line of 50 that separates expansion from contraction.
New order inflows saw a sustained increase, although the pace of growth was the slowest since January, while severe supply chain disruption hampered the receipt of inputs for production.

CHINA

China’s foreign trade may face a more complicated situation next year given base effects and receding positive factors associated with the global COVID-19 pandemic, Wang Wentao, the country’s Commerce Minister said on Monday.
Foreign trade already faces a complex situation in the second half this year, Wang told a news conference in Beijing.
China’s cross-cyclical macroeconomic policy will help economic fluctuations stay within a reasonable range, Wang added.

Market Overview:

Gold

Gold prices ranged at around $1,785 for the past week, waiting for fresh catalysts
The Jackson Hole symposium will be closely eyed by bullion traders for clues about the Fed’s tapering timeline
Breaking above $1,785 may open the door for further gains, whereas a pullback may bring $1,750 into focus

Oil

Oil prices rose on Monday, recovering from a seven-day losing streak as investors hunted for bargains and a softer dollar lent support, though persistent anxiety over surging cases of the Delta coronavirus variant kept sentiment cautious.
Brent crude futures climbed $1.16, or 1.8%, to $66.34 a barrel by 0430 GMT, after hitting the lowest level since May 21 of $64.60 earlier in the session.

Below are the major market moving events for the week:

Monday

3:30: Germany – Manufacturing PMI: to slip to 65.0 from 65.9.

4:40: UK – Manufacturing PMI: anticipated to come in at 59.5, lower than July’s 60.4.

10:00: US – Existing Home Sales: forecast to fall to 5.81M from 5.86M.

Tuesday

2:00: Germany – GDP: expected to remain flat at 1.5% YoY.

10:00: US – New Home Sales: seen to rise to 690K from 676K.

Wednesday

4:00: Germany – Ifo Business Climate Index: likely edged down to 100.4 from 100.8.

8:30: US – Core Durable Goods Orders: predicted to hold steady at 0.5%.

10:30: US – Crude Oil Inventories: anticipated to surge to -1.055M from an upward revision of -3.234M.

Thursday

7:30: Eurozone – ECB Publishes Account of Monetary Policy Meeting

8:30: US – Initial Jobless Claims: foreseen to tick higher, to 350K from 348K.

21:30: Australia – Retail Sales: forecast to slump to -2.9% from -1.8% MoM.

Friday

8:30: US – Core PCE Price Index: to slip to 0.3% from 0.4% MoM; to rise to 3.6% from 3.5% YoY.

8:30: US – Personal Spending: expected to tumble to 0.3% in July, from 1.0% previously.

Based on the above factors and the events lined up for the week, the analyst at RvR Ventures suggests you to Trade responsibly; invest only as much as you can lose. All the profits and losses due to the above data are your own personal responsibility. Kindly practice money management & risk mitigation while trading.

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