Articles

China’s latest economic data is confirming that the world’s second-largest economy continues to struggle. Hitting its 5% growth target may require more drastic measures, fueling expectations for further government intervention.

July’s data showed:

• home prices dropping at the fastest rate in nine years
• industrial output slowing
• rising unemployment
• even where data beat forecasts, underlying issues persist, such as inflation driven by bad weather and frontloaded chip imports due to looming US tech restrictions

• Analysts are now speculating that Beijing might be forced to ramp up fiscal support, possibly widening the budget deficit to 4% of GDP (from currently 3%) and even issuing shopping vouchers to boost consumer spending. Also, a top policy adviser hinted that China could bring forward next year’s bond issuance if growth doesn’t rebound soon

Skepticism about issuing vouchers remains:

• similar measures during the pandemic had limited success
• while some see vouchers as a quick fix, many believe sustained economic recovery hinges on a rebound in the property and stock markets

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

Global financial markets got nicely back on track last week with the crashes of a couple of weeks ago starting to drop into the distance in the rear-view mirror for many investors. Stocks have risen nicely to push back towards record highs as data in the US has pointed strongly towards a soft landing for the world’s biggest economy.

The macroeconomic data calendar is again relatively quiet through the week and investors will be hoping that the positive momentum from the last few days trading will continue to build. There are some key data releases in some jurisdictions for traders to monitor but the highlight for many is likely to come at the end of the week when the great and good of the central bank world meet in Jackson Hole, Wyoming where key updates from the Fed and BOE amongst others could move markets.

Here is our usual day-by-day break down of the major risk events this week:

It’s a quiet start to the week on the event calendar with little on the schedule for the first two trading sessions of the day. The New York session is also thin on data releases, but we do hear from Fed member Christopher Waller early in the session which could push rate cut expectations one way or the other.

There is the potential for some volatility in Asian markets on Tuesday with China due to announce any changes in the Loan Prime Rates and the RBA’s Monetary Policy Meeting Minutes being released. The European session see’s the SNB’s Thomas Jordan speaking in early in the day, but the highlight of the day comes in the New York session with the latest Canadian CPI data due out. Later in the session we hear from the Fed’s Bostic and Barr.

There is very little scheduled to move markets on Wednesday across all three trading sessions until we hit what will be the main focus for most traders at the end of the US Day when the FOMC’s latest meeting minutes are released.

Thursday sees a raft of Flash Manufacturing and Service PMI data releases due across the day with numbers due out from Australia, France, Germany, the UK and the US – although not as impactful as CPI data these number are closely watched as another piece of the inflation puzzle. The US session also has the usual weekly unemployment claims numbers due out as well.

The early focus in Asia will be on New Zealand with the latest Retail Sales numbers due out, however it is then a long wait for investors until we get to the US session and the start of the Jackson Hole Symposium, where we are due to hear from the Fed’s Jerome Powell and the Bank of England’s Andrew Bailey. Prior to the big central bank updates we also have the latest Canadian Retail Sales numbers due out.

The post The Week Ahead – Week Commencing 19 August 2024 first appeared on IC Markets | Official Blog.

UK estate agents are reporting more buyer interest following the Bank of England interest rate cut

• The Bank of England began cutting interest rates from a 16-year high on August 1

Rightmove survey showed:

Also:

• buyer
  enquiries in August were 19% higher than a year earlier,
  compared with an 11% annual increase in July

Rightmove director Tim Bannister (via Reuters report):

• “While mortgage rates aren’t yet substantially lower since
  the rate cut, the fact that the long-hoped-for first cut has
  finally arrived, and mortgage rates are heading downwards, is
  positive for home-mover sentiment”

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

BNZ – BusinessNZ Performance of Services Index for June 2024, via BusiznessNZ, comes in at 44.6

• prior 40.7 (revised a touch higher)

The report, in summary:

• Activity in New Zealand’s services sector for July showed some improvement after a horrendous June result
• 44.6 is the highest result since May
• has averaged 46.5 so far for 2024, compared with 53.2 over the history of the survey

BNZ’s Senior Economist Doug Steel:

• “to get some perspective on how challenging the current environment is for service sector firms, it’s notable the increase in the PSI does not even get the index back to the level it was during the depths of the GFC back in 2008/09”

The Composite comes in at 44.3

• prior 40.9

NZD/USD update, circa 0.6055, back to its high late Friday.

Earlier:

• New Zealand July Manufacturing PMI 44.0 (prior 41.1)

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

There isn’t much here to move major FX rates upon release.

This snapshot from the ForexLive economic data calendar, access it here.

The times in the left-most column are GMT.

The numbers in the right-most column are the ‘prior’ (previous month/quarter as the case may be) result. The number in the column next to that, where there is a number, is the consensus median expected.

This article was written by Eamonn Sheridan 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.

Headlines hitting the wires with no further details.

For markets the focus is on the impact on oil prices. Oil futures reopen for the week’s trade in a couple of hours (6pm US Eastern time).

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

As is usual for a Monday morning, market liquidity is very thin until it improves as more Asian centres come online … prices are liable to swing around, so take care out there.

Indicative rates, not a lot changed from late Friday levels:

• EUR/USD 1.1028
• USD/JPY 147.65
• GBP/USD 1.2935
• USD/CAD 1.3690
• AUD/USD 0.6665
• NZD/USD 0.6045

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

I’m hosting a special free webinar on Monday at 9 am ET (1300 GMT) on ‘7 Common Trading Traps and How to Avoid Them’

It’s
an especially notable topic right now given the moves in the yen and
equities this month. The best way to make it in markets is to stay in
markets.

Register here as space is limited.

I’m also looking forward to a Q&A as it’s always great to touch base our community.

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

UPCOMING
EVENTS:

• Monday: New Zealand Services PMI, Fed’s Waller, BoC’s
  Senior Loan Officer Survey.
• Tuesday: PBoC LPR, RBA Meeting Minutes, Canada CPI,
  Eurozone Wage Growth.
• Wednesday: Canada PPI, FOMC Meeting Minutes.
• Thursday: Australia/Japan/Eurozone/UK/US Flash PMIs, ECB
  Meeting Minutes, US Jobless Claims, Jackson Hole Symposium.
• Friday: New Zealand Retail Sales, Japan CPI, Canada
  Retail Sales, Fed Chair Powell, Jackson Hole Symposium.

Tuesday

The PBoC is
expected to keep the 1-year and 5-year LPR rates unchanged at 3.35% and 3.85%
respectively. Such expectations are mainly due to the fact that the central
bank delivered substantial rate cuts across the board last month and will likely refrain from adjusting
interest rates again so soon.

The Canadian CPI
Y/Y is expected at 2.5% vs. 2.7% prior, while the M/M figure is seen at 0.4%
vs. -0.1% prior. The central bank focuses on the underlying inflation measures
(mainly Trimmed Mean CPI). The Trimmed-Mean CPI Y/Y is expected at 2.8% vs.
2.9% prior. The market is assigning a 98% probability of a 25 bps cut in
September and a total of 73 bps of easing by year-end.

Thursday

Thursday will be
the Flash PMIs Day for many major economies with the Eurozone, UK and US PMIs
being the main highlights:

• Eurozone Manufacturing PMI: 46.0 expected vs.
  45.8 prior.
• Eurozone Services PMI: 51.9 expected vs. 51.9 prior.
• UK Manufacturing PMI: 52.1 expected vs. 52.1
  prior.
• UK Services PMI: 52.8 expected vs. 52.5 prior.
• US Manufacturing PMI: 49.5 expected vs. 49.6
  prior.
• US Services PMI: 54.0 expected vs. 55.0 prior.

The US Jobless
Claims continue to be one of the most important releases to follow every week
as it’s a timelier indicator on the state of the labour market.

Initial Claims
remain inside the 200K-260K range created since 2022, while Continuing Claims
have been on a sustained rise showing that layoffs are not accelerating and
remain at low levels while hiring is more subdued.

This week Initial
Claims are expected at 230K vs. 227K prior, while there’s no consensus for Continuing
Claims at the time of writing although last week we saw a pullback to 1864K vs. 1871K prior.

Friday

The Japanese Core
CPI Y/Y is expected at 2.7% vs. 2.6% prior. As a reminder, the BoJ surprised
with a 15 bps hike (even though we got a leak the day earlier) at the
latest policy decision and that triggered a mess in the Japanese markets with
the Yen surging and the Nikkei falling like a rock, especially after BoJ’s Ueda comment on not seeing 0.50% as a policy ceiling.

Since then, we got
comments from Japanese officials cautioning on further rate hikes given the
turmoil in financial markets. The expectations are now for a rate hike in March
2025.

The main event of
the week will be Fed Chair Powell speaking at the Jackson Hole Symposium at 10:00
am ET. The Jackson Hole Symposium is famous for major policy communications
from the Fed.

In August 2020
Powell announced a change in the Fed’s inflation strategy called AIT (Average
Inflation Targeting) which was meant to allow inflation to move above and below
the target rate of 2% so that it averaged out to 2% over time.

I expect Powell to
finally pre-commit to a rate cut in September saying something like “the
time to ease policy has come”. Although the market has already fully priced in
at least three cuts by the end of the year, it would still be a major event
which should reverberate in the market’s sentiment.

He will also be
asked about the size of the rate cut as there are still small chances of a 50
bps cut in September (28%). He will likely dodge the question but if he were to
leave the door open for a larger cut, it will be seen as a dovish “surprise”.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

We’ve been spared from summer doldrums in financial markets this year but early next week could be something of a dud, particularly until Jackson Hole begins.

Monday kicks off with Fed’s Waller speaking at 09:15 am ET but that will be all for the day.

Tuesday features speeches from the Fed’s Bostic and Barr but is otherwise bare.

Wednesday is hardly better with only EIA weekly crude oil stocks and a 20-Year bond auction. The highlight will be the FOMC Minutes release at 14:00 pm ET; expect some dovish indicators there.

Thursday is when it picks up with jobless claims data, S&P Global PMIs (composite, services, and manufacturing), and existing home sales. The consensus for Initial Jobless Claims is 229K while existing home sales are expected to show a 0.4% decline. The Jackson Hole Symposium also begins, with extra Fed interviews usually scheduled for the early US morning.

Friday closes the week with new home sales data, expected to show a 0.6% decline to 0.63 million. The main event will be Fed Chair Powell’s speech at 10:00 am ET from Jackson Hole but with Fed pricing at 75% for 25 bps, I don’t currently see a need to make any big waves. Baker Hughes US Oil Rig Count and CFTC position data round out the day.

The Jackson Hole Symposium continues through Saturday.

For more, see the economic calendar.

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