Global Themes

US central bank event tops; the week ahead     
- Jackson Hole central bank event key this week
- Investors anticipate ECB President Draghi’s speech
- 3rd consecutive week of Sterling losses
- White House staff exits continue

Jackson Hole

The absence of top-tier economic data means most market participants will focus predominately on the annual Jackson Hole Symposium in Wyoming, US (August 24th-26th).

Several key Federal Reserve (Fed) members will speak including Fed Chair Janet Yellen on Friday at 3pm. Any announcement confirming the reduction of the balance sheet or another interest rate hike before year-end is likely to strengthen the US Dollar. However, vague rhetoric amid concerns surrounding lacklustre inflation, could weaken the currency.

Market participants who have been anticipating clues as to when the European Central Bank (ECB) will begin winding down its quantitative easing stimulus programme could be disappointed by ECB President Mario Draghi’s speech at the Jackson Hole Symposium at 8pm on Friday. Sources from within the ECB have said that Mr Draghi’s speech will focus on the themes of the symposium (source: Reuters). If Mr Draghi does make any comments around central bank policy that take markets by surprise we could see some high volatility in late Friday trading. 

ECB

The ECB President is also giving a speech at 8am on Wednesday morning and this could give us clues as to what he will say in his Jackson Hole speech. If Mr Draghi wants to avoid market speculation on ECB policy he is unlikely to mention central bank policy here either.

Key data releases in the Eurozone this week are German ZEW Economic Sentiment on Tuesday 10:00am, forecasted to fall to 15.3 from 17.5. On Wednesday German and French flash manufacturing and services PMI data is released before the overall Eurozone numbers at 9:00am. Manufacturing PMI is forecasted to have dropped from June’s number of 56.6 to 56.3, services is predicted to stay the same at 55.4.

GBP

Sterling closed out its 3rd week of losses against the Euro. GBP/EUR traded to a 7-year low touching €1.0924 last week. Economic data, which market participants had hoped would boost Sterling, failed to do so with UK wage growth still lagging significantly behind inflation. This further lowered chances of an interest rate hike from the Bank of England (BOE). GBP/USD remains range-bound, trading around the $1.28 mark.

Over the weekend the UK Government declared it’s “stepping up pressure” on the EU to shift the topic away from terms of the separation to trade arrangements as soon as October (source: Bloomberg). The UK wants to change the narrative as the two sides remain in deadlock over specific issues. EU chief negotiator Michael Barnier last week reiterated that the other 27 governments would not allow trade talks until sufficient progress had been made regarding residency rights, UK exit bill and borders.

Revised UK Q2 GDP will be released Thursday morning at 09:30am; there is no forecasted change from the previous figures of y/y 1.7% and q/q 0.3%. Should the actual release divert from the forecast markets could react accordingly.

US

The exit of US President Donald Trump’s chief strategist Steve Bannon last Friday added to the growing concerns about the instability of the Trump administration. Continued uncertainty over the economic agenda of Mr Trump has pressured the dollar over 9% lower this year. The US Dollar Index which measures the value of the dollar against a basket of currencies now sits at around 93, down from 103 in January.

Preliminary US manufacturing and services PMI for August will be released on Wednesday at 2:45pm, with expectations that both sectors are performing better. Durable goods orders for July will be released on Friday at 1:30pm, which is forecast to show a fall in production activity and if so, could hurt the dollar. 




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