Jackson Hole Symposium and the Spotlight on Powell: A Look Ahead

The upcoming week holds great significance for the global financial markets. Private sector PMIs and the presence of Fed Chair Powell may indicate approval for a potential September rate hike by the Federal Reserve.

On the Macro

 It is a significant week ahead in terms of economic events. With market expectations leaning towards a more hawkish stance by the Federal Reserve, all eyes will be on the Jackson Hole Symposium and the presence of Fed Chair Powell. Additionally, preliminary private sector PMIs and the performance of the German economy will shape the stage for upcoming central bank monetary policy decisions.

For the Dollar: On Wednesday, the preliminary private sector PMIs for August will be pivotal. The Services PMI is expected to have a greater impact, but investors should also consider key sub-components like new orders, employment, and input/output prices. Thursday will bring core durable goods orders and the weekly jobless claims figures, with the latter potentially challenging the notion of a weaker labor market if initial jobless claims continue to decline. The week will conclude with the Michigan consumer sentiment numbers, providing further insights into the US economic landscape. Ultimately, the focus will remain on the Jackson Hole Symposium and the subsequent remarks by Fed Chair Powell, influencing the overall sentiment towards the US economy and future interest rates.

For the EUR: The Euro has a busy week ahead. It begins with the release of German producer price index numbers on Monday, which could support the prevailing gloomy outlook for the German economy if further declines are observed. However, the real market movers will be the preliminary private sector PMIs for France, Germany, and the Eurozone on Wednesday. A more pronounced contraction in the manufacturing sector, coupled with a slowdown in service sector growth, may challenge expectations of additional rate hikes by the European Central Bank (ECB). The week concludes with the release of German GDP and Ifo Business Climate Index figures on Friday. Throughout the week, investors should also pay attention to any commentary from ECB officials.

For the Pound: Although it is a relatively quieter week for the Pound, the fate of the next Bank of England (BoE) monetary policy decision may hinge on the preliminary private sector PMI numbers for August. The services PMI will likely be the center of attention, with concerns of a UK economic recession reigniting if there is a contraction across the services sector. Given the lighter economic calendar, investors should monitor any chatter from BoE officials in the media, as there are no Monetary Policy Committee (MPC) members scheduled to speak.

For the Loonie: The Canadian Dollar is poised for a relatively busy week. The focus will be on retail and core retail sales data, scheduled to be released on Wednesday. The decision on the September interest rate hike by the Bank of Canada (BoC) is still uncertain, and an increase in consumer spending could provide further incentive for the BoC to raise rates. In addition to retail sales, investors should also keep an eye on new house prices and wholesale sale figures, although these may have less impact compared to the retail sales report.

Out of Asia

For the Aussie Dollar: It will be a quiet week for the Australian Dollar, as no major economic indicators are scheduled for release. In the absence of domestic economic data, the performance of the Australian Dollar will largely depend on news related to China and any stimulus announcements.

For the Kiwi Dollar: The Kiwi Dollar is also in for a quiet week, but the retail sales figures for the second quarter will demand attention on Wednesday. After the Reserve Bank of New Zealand (RBNZ) decided to keep interest rates unchanged at 5.5% last week, a significant increase in retail sales could challenge the expectation of an extended pause in rate hikes. Alongside economic numbers, news related to China and stimulus plans will also play a role in influencing the Kiwi Dollar.

For the Japanese Yen: Another busy week awaits the Japanese Yen. Preliminary private sector PMI numbers for August, particularly the Services PMI, will be of interest on Wednesday. However, Tokyo inflation numbers for August will likely gather more attention. Despite the slight adjustment to the Yield Curve Control policy, the Bank of Japan (BoJ) remains committed to maintaining an ultra-loose monetary policy stance. Softer inflation figures could reinforce the BoJ's decision to maintain its current policy approach.

Out of China: Following another challenging week for the Chinese economy, the People's Bank of China (PBoC) is scheduled to announce the loan prime rate decisions on Monday. Economists anticipate a drop in the 5-year loan prime rate from 4.2% to 4.05% and a decrease in the 1-year loan prime rate from 3.55% to 3.40%. However, the markets will require convincing regarding the need for further stimulus to alleviate concerns of a more pronounced growth slowdown. It is important for investors to monitor news related to stimulus discussions from Beijing.