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Yellen and Draghi to Steal Show at Jackson Hole

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USD

The greenback regained some ground on the return of risk-aversion owing to uncertainty over North Kora. South Korea and the United States have started joint military this week and the North sees this as an act of provocation. Earlier today, the Greenback weakened vs. the Japanese yen following President Trump's comments; Donald Trump said he would be willing to shut down the government in order to get the funding needed for his proposed wall along the U.S. Mexico border. This has raised concerns about the uncertainty over Donald Trump's economic agenda and doubts that the Federal Reserve will deliver a third rate hike before the year-end. However, moves among major currencies were limited ahead of global central bankers' conference.

Traders are especially awaiting speeches from Fed Chair Janet Yellen and European Central Bank President Mario Draghi, although it is not expected to announce any important policy messages. That's not to say it doesn't matter for markets in the long-run. Traders will focus more on what isn’t said.

On the release front, the Richmond manufacturing index remained unchanged at 14 while the US HPI printed a minor 0.1% increase. Flash manufacturing and service PMIs for August, new home sales data for July and the US Markit manufacturing are due next.

  • The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell as much as 0.06%, to settle at 93.49 pips.

EUR

The single currency pressured by a weaker-than-expected reading on investor confidence across the Euro-zone. An official Data showed that the Euro-zone’s ZEW economic sentiment index fell more-than-expected to a level of 29.3 from 35.6 in August, touching its lowest since April 2017.

On the release front, traders are awaiting the flash Markit manufacturing and services PMIs data for August across the Eurozone. In addition, Draghi is also due to give a speech in Germany later on today.

GBP

The pound has continued to remain under pressure on Brexit risks and breached the 1.28 barrier to drop to an 8-week low against the greenback in the early morning European session. The lower yielding UK government bonds also make the currency quite fragile against its contemporaries. On the tap, the UK public sector net borrowing printed a 0.8 billion pound deficit implying that the government was able to collect more than it had spent during the period. With an empty economic calendar for the remainder of the session, market sentiment around Brexit will mostly likely be a key driver for the currency.

JPY

The Japanese currency benefited from risk off flows on the back of North Korean jitters. Investors see the currency as a safe heaven. On the data front, Japans flash manufacturing PMI increased to 52.8 form 52.1, higher than the anticipated 52.3 figure. Risk-on risk-off flows will continue to push yen pairs around. 

Gold

Gold gained ground after President Donald Trump threatened to shut down the Government if he did not receive funding for a proposed border wall with Mexico.

Spot gold traded higher, touching $1,286.72, while Gold Futures - Dec 17, rose as much as 0.12%, to settle at $1,292.50.

However, the yellow metal could be widely affected over the short-term as traders turned cautious before the central bankers meeting this week in Jackson Hole, Wyoming, which may provide new hints on interest rates and canceling stimulus programs.

Oil

Oil prices drifted lower on Wednesday, amid concerns of oversupply as U.S. gasoline inventories increased and as Libyan supply improved despite the peak summer driving season.

Over the day, the official inventories data is due to be released by the U.S. Energy Information Administration.

Brent crude futures, the international benchmark for oil prices, were at $51.69 per barrel down 0.35%, while Crude Oil WTI Futures - Oct 17 fell as much as 0.40%, to settle at $47.66.

The most important economic events:

  • EUR ECB's Draghi Speaks in Lindau, Germany: (GMT 07:00) – Important
  • USD Markit US Manufacturing PMI (AUG P): (GMT 14:00) – Important – Forecast (53.5) – Previous (53.3).
  • USD New Home Sales (MoM) (JUL): (GMT 14:00) – Important – Forecast (0.0%) – Previous (0.8%).

Disclaimer
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.

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