- Market awaits Jackson Hole symposium
- US unemployment claims data this afternoon
Yesterday was a relatively quiet day in the foreign exchange markets with only mid-tier data being released. Sterling was the best performing currency despite mortgage approvals showing a clear drop for the month. The British Bankers Association however also reported that consumer credit rose at its strongest pace in nearly 10 years. So it would seem that the vote for Brexit may have slowed the housing market, it hasn’t necessarily had an impact on consumption.
Nevertheless Sterling may erase these gains depending on the tone that Fed Chair Yellen strikes at the Jackson Hole symposium on Friday. Investors will be looking to her speech to see if it provides any indication as to when the Federal Reserve may raise interest rates. So far the market remains sceptical with only a 50% chance of a hike being priced in. Earlier in the week Fed Presidents Dudley and Fischer shared a hawkish tone expressing their concerns that the market has under-priced the chances of a rise in 2016 and President Dudley went as far as to say they could in fact raise rates as early as September. It is important to realise that all of these comments were made after disappointing retail sales which means policymakers are not worried about spending slowing down and instead expect consumption to be supported by the improvement in the labour market and wage growth. Fed Chair Yellen however, is known to be more cautious and dovish then some of her fellow voting members and with central banks around the world still easing and an impending election; will she share the same positive outlook?
Earlier this week we learned that manufacturing and the service sector activity in the Eurozone largest economy Germany slowed. This did not bode well for the German IFO Business Optimism data released this morning which fell to 106.20 reflecting a negative mood from the Brexit that has affected business expectations.
There is a raft of US data due to be released later this afternoon including Jobless Claims and Durable Goods however attention will turn to tomorrow and Yellen’s speech at Jackson Hole. There is likely to be volatility around the speech although due to the academic nature around events at Jackson Hole, do not be surprised if the market ends up underwhelmed.
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Today's Major Economic Releases
||UK: CBI realized sales
||US: Core durable goods orders m/m
||US: Unemployment claims
||US: Durable goods orders m/m
||US: Flash service PMI
FX Research by Denzil Rickerby
Daily Currency Analysis with William Busby
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