Last week we saw the US Dollar remain under pressure as economic data raised some question marks about its recovery. A leading indicator for employment, the weekly jobless claims, increased back above a million posting a figure of 1.1m, which was greater than the forecast of 930k. Compounding the recovery question marks was the Philly Fed Manufacturing data which was lower than expected as well as down from previous reports, suggesting that momentum is slowing. Keeping the Dollar under pressure was the sentiment in equity markets, with news from Pfizer that its Covid-19 vaccine was on course for regulatory review in October, has lent support.
Sterling had a whipsaw week as both economic data and trade talk news drove the price. Sterling moved lower initially as speculation mounted that tensions between the UK and EU were raised during their trade talks. It was reported in the Financial Times that Brussels has rejected the UK’s opening demands for continued wide-ranging access to the EU for British truckers. During Friday’s press conference, Sterling once again came under pressure following comments from negotiators Michel Barnier and David Frost. The EU negotiator stated that he was “disappointed” and “concerned”, whilst UK negotiator David Frost spoke of “little progress”. Meanwhile, economic data continues to remain positive for the UK. Retail sales, services and manufacturing data all improved highlighting that the recovery’s momentum is continuing post easing restrictions. It will be interesting to see if the UK can continue this once the government’s schemes end – Furlough and Eat Out to Help Out.
In Europe, concerns are starting to emerge as Coronavirus cases increase in several countries, notably the stalwarts of France and Germany. This was further compounded as disappointing August Eurozone PMI data provided timely updates of the impact of the pandemic with both the manufacturing and service numbers disappointing.
Looking to the week ahead, US data will dominate the docket and may provide the market with further insight on how the economy is performing. The market may focus on the virtual Jackson Hole Symposium. This is attended by central bankers, finance ministers, academics, and financial market participants from around the world. The title of this year’s symposium is “Navigating the Decade Ahead” however, much of the focus may be on the near-term outlook.
- Chicago Fed National Activity Index
It is a quiet start to the week with only the Chicago Fed National Activity, the June figure posted a record high following the lockdown restrictions. The market will be keen to see if the region can maintain this momentum.
- GER IFO survey
- US Consumer Confidence
The German IFO survey will be another timely update for August. It is forecast a further rise in both current conditions and expectations (6-month view). The CB consumer confidence is set for release, a survey of 3000 households. Given last week’s pick-up in jobless claims and slowing momentum, the market will be keen to see if this is reflected in consumer confidence.
- US Durable goods
The US durable goods may be a good indication of consumer desire to purchase bigger ticket items. Durable goods are products that tend to have a life expectancy of greater than 3 years. As a result, consumer confidence can normally be derived from these sales due to buying habits surrounding higher-priced items. The headline figure is expected to remain positive, but the pace of sales may decline from the previous month.
- US jobless claims
- US Prem Q2 GDP (2nd reading)
- Jackson Hole Symposium
Following last week’s increase in jobless claims back above a million, the market will be focused to see if this was just a blip or the potential start of a wider trend. The second reading of GDP is released with a slight improvement expected on the annualised figure from -32.9% to -32.5%.
The virtual Jackson Hole Symposium may take centre stage. It is attended by central bankers, finance ministers, academics, and financial market participants from around the world. FOMC Chair Powell is due to deliver a speech titled “Monetary Policy Framework Review”. This may be another opportunity to signpost the FOMC’s plans.
- US UoM Consumer sentiment
- US Personal Spending
- Jackson Hole Symposium
The virtual Jackson Hole Symposium continues with the BoE Gov Bailey speaking via satellite. Ending the week, there is more consumer data from the US to focus on, to assess sentiment given the rise in COVID and current conditions. Today sees the US Personal Spending numbers along with the University of Michigan consumer sentiment numbers hitting the wires. Spending is expected to decline from last month’s levels.
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