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Japan finance minister Suzuki:

• can’t rule out the possibility of Japan’s economy falling back into deflation
• Weak yen has pros and cons
• Japan has taken action, including FX intervention, as excessive volatility in forex is not desirable

Ueda and Suzuki

Earlier:

• Bank of Japan Governor Ueda says BOJ’s policy steps were appropriate

• BOJ Governor Ueda says concerns over US economy slowdown behind recent market rout
• BoJ Ueda will adjust monetary easing if our economy price outlook is likely to be achieved

This article was written by Eamonn Sheridan at www.forexlive.com.

Seeking Alpha (gated) with the info from a note from UBS on oil, expects Brent to recover into an $85-90/ bbl range over the coming months.

The note is a good summary of the mix of factors at play.

On demand and the recent slide in price:

• recession fears in the US, ongoing ceasefire hopes in Gaza have
  lowered crude’s risk premium

• weak Chinese crude imports and refinery activity in July sparked
  fears of poor Chinese oil demand

On supply:

• US crude production growth is slowing down
• declining US drilling activity doesn’t suggest an acceleration in supply growth in
  the near term
• OPEC+
  is likely to stick to its cautious approach when adding back supply

Oil update:

This article was written by Eamonn Sheridan at www.forexlive.com.

In brief:

• Expectations from the survey are that core CPI is forecast to rise 2.7% y/y in July vs 2.6% in June
• This would register inflation above the BOJ 2% target for the 28th straight month
• End of energy subsidies likely boosted headline figure

I posted on this earlier this week but repeating it here.

The data is due at the bottom of the hour.

Later today we’ll also get Bank of Japan Governor Ueda speaking.

• Reminder, Bank of Japan Governor Ueda will speak in Japan’s parliament on Friday

This article was written by Eamonn Sheridan at www.forexlive.com.

GfK Consumer Confidence still net pessimistic but holding at its highest since around three years ago.

Joe Staton, client strategy director at GfK:

• “This more positive outlook may be due to a
  mortgage-friendly interest rate cut at the beginning of August,
  and hopes of more to come”

This article was written by Eamonn Sheridan at www.forexlive.com.

New Zealand’s economy was under intense pressure during the quarter after a long and sustained Reserve Bank of New Zealand rate hike cycle.

There was some relief earlier this month,

• ForexLive Asia-Pacific FX news wrap: RBNZ cuts rates

but not showing in these figures of course.

Q2 Retail Sales -1.2% q/q

• expected -1.0%, prior +0.5%

-3.6% y/y

• prior -2.4%

For core sales -1.0% q/q

• expected -0.8%, prior +0.4%

Some of the points made by Stats NZ:

• Eleven of the 15 industries had lower seasonally adjusted sales volumes in the June 2024 quarter compared with the March 2024 quarter.
• Eleven of the 15 industries had lower seasonally adjusted sales values in the June 2024 quarter compared with the March 2024 quarter.
• Fourteen of the 16 regions had lower seasonally adjusted sales values in the June 2024 quarter compared with the March 2024 quarter.

Ugly results.

New Zealand’s quarterly retail sales data provides a key indicator of the country’s economic activity, reflecting consumer spending across various retail sectors. This data is published by Statistics New Zealand (Stats NZ).

This article was written by Eamonn Sheridan at www.forexlive.com.

• August US S&P Global services PMI 55.2 vs 54.0 expected
• US initial jobless claims 232K vs 230K expected
• US July existing home sales 3.95m vs 3.93m expected
• Eurozone August flash consumer confidence -13.4 vs -12.6 expected
• Fed’s Collins: Timing seems appropriate to begin easing monetary policy
• Collins: Soon is appropriate to begin cutting rates
• Harker: We see softening in jobs from a very high level
• Harker says he’s ready to start the process of cutting rates
• Fed’s Schmid: Rates are not overly restrictive, we have time to decide
• Canadian government says it’s exploring all options on ending rail lockout
• US 30-year TIPS sell at 2.055% vs 2.045% WI
• Preview: What to expect from Powell at Jackson Hole
• Chicago Fed national activity index -0.34 vs +0.05 prior

Markets:

• USD leads, JPY lags
• WTI crude oil up 98-cents to $72.91
• US 10-year yields up 8.9 bps to 3.86%
• Gold down $29 to $2483
• S&P 500 down 0.9%

The recent theme in markets has been: Lower dollar, higher stocks, lower yields, lower oil. That completely reversed today in what’s equal measures of a technical retracement and worries about a hawkish speech from Powell at Jackson Hole. The moves were also helped along by another round of US data that showed an economy that’s plodding along.

US dollar strength intensified at 9 am ET and it was largely a one-leg move that chopped sideways afterwards. Falling stocks and a softer TIPS auction tried to give it fresh legs but the euro was reluctant to fall below 1.11 and that stemmed the move.

USD/JPY is the big mover on the day in what was a steady climb that started in Asia and then stalled in US trading. So far, sellers at 146.50 have held the line.

Commodity currencies were generally soft and AUD underperformed by a decent clip. in a retreat to 0.6700.

Gold and oil went in opposite direction in a reversal of the recent trend. Gold hit stops as it fell through $2495 but steadied and rebounded ahead of $2470. For oil, it was the first gain in 5 trading days.

This article was written by Adam Button at www.forexlive.com.

Good morning, afternoon and evening all. Any charts, technical analysis, trade ideas, thoughts, views, ForexLive traders would like to share and discuss with fellow ForexLive traders, please do so:

This article was written by Eamonn Sheridan at www.forexlive.com.

US equities opened higher but with Treasury yields rising and Powell on the agenda tomorrow, the worries crept it. Big cap tech was particularly soft as well.

Aside from Powell, some may be eyeing Kamala Harris’ speech tonight as a risk. The S&P 500 traced an outside day, which is something of a red flag, technically.

• S&P 500 -1.1%
• Nasdaq Comp -1.8%
• DJIA -0.55%
• Russell 2000 -0.8%
• Toronto TSX Comp -0.4%

This article was written by Adam Button at www.forexlive.com.

Yesterday the euro touched the highest in a year as it rallied for a fourth straight day. A good chunk of that climb was on the heels of a broadly softening US dollar but the market is also feeling more comfortable with the idea that the eurozone isn’t headed for an ugly economic outcome.

Today’s eurozone flash consumer confidence data was a touch softer than the consensus but the trend has clearly improved, albeit slowly.

With the broad USD bounce back today on worries about a hawkish Powell, the euro has given back yesterday’s gains. What’s notable though is that the bulls have been buying on three dips just below 1.1100. So far the bounces have been shallow but that’s going to be the level to watch until the 10 am Friday speech.

This article was written by Adam Button at www.forexlive.com.

Friday at 10 am ET, Federal Reserve Chairman Jerome Powell will deliver his highly-anticipated annual speech at Jackson Hole in Wyoming.

Current market pricing has been shifting away from 50 basis points; though retaining a high probability of 50 bps before the year is done. For the Sept meeting, the market sees a 75% chance of 25 bps with the remainder at 50 bps. For year end there are 97 bps of easing priced in and for this time next year there are 194 bps priced in (that’s 8 meetings so almost 25 bps at each).

Throughout his tenure, Powell has always liked to retain as much optionality as possible before launching signals when the data was clear. In this case, he’s ready to signal a September cut more strongly than before.

This will come with him expressing ‘greater confidence’ that inflation is on a sustainable path to 2%. It could also take the form of something more explicit. On Thursday, regional Fed Presidents Harker and Collins both said they were ready to cut. Harker said he was ready to start the process of cutting rates. Collins said the timing seems appropriate to begin easing monetary policy.

If Powell uses that kind of declarative language it would be marginally dovish, though not entirely unexpected.

The destination, not the starting point

I’m less interested in the 25 vs 50 debate for September than indications about the cadence and destination of rates. Harker on Thursday said the end of the easing cycle may put Fed funds around 3%. Powell could also substitute 3% with ‘neutral’ but in either case it would indicate the Fed is on autopilot. That would weigh on the dollar and give the market comfort that the baseline for each meeting going forward is a 25 bps cut or 50 bps if the economy/employment worsens.

At the same time, it would be no surprise if he once-again said that the terminal rate for policy is likely to be higher than pre-pandemic. This is something I disagree with but we

Monetary policy ‘positioned appropriately’

Some Fed officials have recently begun using the language ‘posited appropriately’ or ‘policy is well-positioned’. I think this may be a code word to push back against the idea of a 50 bps cut. The thinking there is that if they were behind the curve, they would need to cut more aggressively.

If Powell says that, I expect a hawkish reaction in markets, which would otherwise boost the US dollar. That said, with just a 25% chance of 50 bps priced in, I wouldn’t expect a big reaction. Rather, I think markets will look to the Sept 6 non-farm payrolls report as a stronger guide.

Clues on the economy

The focus has been on the inflation side of the mandate for so long that market watchers have gotten tunnel vision. Expect headlines on Friday to focus on price indications but I think the inflation story is dead and it hasn’t mattered to markets for awhile. Instead, I’ll be looking for signals on growth. In July, the market grew worried about the Fed falling behind the curve after some poor indications on the services side of the economy, followed by rising jobless claims. Since then, retail sales were stronger, corporate commentary on consumers has been fine and jobless claims have retreated. That’s left sentiment on the economy relatively upbeat, but precarious.

Powell is likely to weigh in. Hints from him that conditions are deteriorating would be worrisome, particularly since he’s been steadfastly upbeat for two years, despite various period of recessionary worries from markets. If he validates those concerns, expect a dovish market reaction in FX, but also some worries in equity markets.

Recently, Chicago Fed President Goolsbee said he was growing more concerned with employment in a preview of what could be to come. Also look for something more explicit on growth in general.

Other clues

The pre-announced topic of Powell’s speech is the “Economic Outlook,” which isn’t much help but the overall topic of the Jackson Hole Symposium is “Reassessing the Effectiveness and Transmission of Monetary Policy”. That could invite a conversation on lags in monetary policy and unusual factors at the moment like 30-year fixed mortgage lock ins and immigration surges.

It could also touch on the importance of a steady hand. On Thursday, Harker highlighted how business contacts wanted a steady response from the Fed. Something along those lines or hints on efforts to reduce policy uncertainty or volatility would be seen as dovish. That said, Powell will be careful to retain optionality in light of the mis-steps around forward guidance following the pandemic.

What he said on July 31

Markets have been volatile but not much has changed in the underlying economy since the FOMC. At the margins, economic data has been better but the big downward revision in non-farm payrolls yesterday raises some employment risks.

Here were some key headlines from when Powell last spoke:

• If we were to see inflation moving down quickly or more-or-less in-line
  with expectations then I would think a rate cut could be on the table in
  Sept
• I can imagine everything from zero to ‘several’ rate cuts this year
• We have made no decisions about September but broad sense is we’re moving closer
• The picture is not one of a slowing or really bad economy
• The chances of a hard landing are ‘low’
• “Recent indicators suggest that economic activity has continued to expand at a solid pace”

Past is prologue

Here is a handy guide from Goldman Sachs to the past six years of Jackson Hole appearances from Powell. My take here is that they tend to run with the Fed cycle. When the Fed was easing in 2019, Powell was dovish. When he was tightening in 2022 and staying tight in 2023, he was hawkish.

See also:

• Federal Reserve Chair Powell to retain optionality, more data to come before Sept meeting
• Powell is likely to highlight inflation progress, allows focus on employment
• MUFG: What to expect from this week’s FOMC Minutes and Jackson Hole Symposium
• Bank of America on Powell speaking at Jackson Hole – to keep aggressive easing option open
• JP Morgan says the Fed has a green light for a 50bp rate cut in Sep. Here’s the trigger

This article was written by Adam Button at www.forexlive.com.

The Nasdaq is now down 1.3% and the S&P 500 down 0.85% — both session lows.

Some stops were hit on the latest leg down as the earlier lows gave way. There is some real angst ahead of Powell tomorrow but at least the weak hands are getting shaken out early.

I don’t see any scope for him saying something that will genuinely rattle markets. I’m more focused on what he will say about the strength of the economy, than on inflation or directly on rates. However he’s been consistently upbeat on growth prospects for years, so that’s the baseline. Or maybe that comes off sounding hawkish?

This article was written by Adam Button at www.forexlive.com.

The Canadian government says it’s exploring all possible solutions to ending a rail lockout that started today, including binding arbitration.

Canadian rail lines carry massive amounts of freight, including into the US. Previously, collective agreements with CN and CP were staggered, so this is the first time they’ve even been shuttered at the same time.

It’s only Day 1 but if it drags for weeks, it will put a major hiccup in Canadian economic data and a minor one is US data. That’s going to make it especially challenging for central bankers to determine if a slowdown is real.

This article was written by Adam Button at www.forexlive.com.