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All Eyes Shift to the World's Central Bankers Meeting

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USD

On Thursday, the greenback rose vs. the yen with the start of the world's central bankers meeting in Jackson Hole, paring some of the losses it suffered after Donald Trump's threat to shut down the U.S. government unless Congress funds his proposed border wall and his threat to end the North American free-trade agreement (NAFTA). There have been talks amongst lawmarkers to refuse to back his campaign pledges but the Senate majority leader, Mitch McConnell has assured that his team will be working closely with Trump.

On the economic data front, results were mixed with the manufacturing PMI printing a surprise dip in activity while the services posted a surprise uptick. New home sales results though disappointed as the increasing price of homes have made it less affordable to potential buyers. Attention now turns to speeches from European Central Bank President Mario Draghi and Federal Reserve Chair Janet Yellen on Friday. Markets are pricing in roughly a 40% chance of a rate hike by year-end; however, Yellen may go against expectations and try to prepare markets for a possible rate hike before the end of the year.  

  • The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.17% at 93.307 pips.

EUR

The common currency slipped as Mario Draghi’s testimony didn’t have any firm indications on monetary policy moves. However, the euro did recover shortly thereafter on expectations of tapering remarks at Jackson Hole. The common currency settled at $1.1794, after having risen about 0.4% yesterday.

In terms of data, Germany's private sector grew at a faster pace in August. Markit's flash composite Purchasing Managers' Index (PMI), rose to 55.7 from its 10-month-low of 54.7 in July. Meanwhile, investors are awaiting German Ifo Business Climate Index, due tomorrow, which is expected to fall after hitting record highs from May to July.

GBP

The sterling had a bit of topsy-turvy day yesterday as it reacted to the moves of its contemporaries as opposed to creating its own direction. No reports came out of the British economy in the previous trading session and markets will have their eye on the 2nd GDP estimate which is due. Predications are that there will be a 0.3% expansion but business investment will decline from 0.6% to 0.2%.

JPY

The Japanese currency took advantage of weakness in the greenback on persistent risks from North Korea and the US government shutdown concerns. Japan’s flash manufacturing PMI printed a stronger result coming out at 52.8 against a predicted 52.3 and an earlier 52.1 figure. With no data from the Japanese economy today, traders will price in their expectations for the CPI data due to the released on Friday.

Gold

Gold drifted lower at the beginning of the day, erasing gains made after President Donald Trump's threat to shut down the U.S. government, with traders are focusing on the world's central bankers meeting. The bulls are struggling to break the $1,300 level following Wednesday’s sharp rally from a low of $1282. US gold futures for December fell as much as -0.25%, to settle at $1,291.50.

Oil

Earlier today, Oil prices managed to settle, holding gains from yesterday’s trading session after another decline in U.S. crude inventories indicated a tighter market and as oil facilities in the Gulf of Mexico were affected by a tropical storm. Oil bulls continue to be pleased with tightening US supplies, as reflected by yet another decrease in the US crude and gasoline stockpiles, despite the US oil output rising to the highest levels since July 2015.

On the data front, U.S. Crude inventories last week declined by 3.3 million barrels, to 463.17 million barrels, down 13.5% from their record levels last March.

U.S. West Texas Intermediate (WTI) crude futures (CLc1) fell as much as 0.14%, to settle at $48.34, while Brent crude futures, (LCOc1) settled at $52.55.

The most important economic events:

  • GBP Gross Domestic Product (YoY) (2Q P): (GMT 08:30) – Important –Forecast (1.7%) –Previous (1.7%).
  • USD Continuing Claims (AUG 12): (GMT 12:30) – Medium – (Forecast (1950k) –Previous (1950k).
  • USD Initial Jobless Claims (AUG 19): (GMT 12:30) – Medium – (Forecast (238k) –Previous (232k).
  • JPY National Consumer Price Index (YoY) (JUL): (GMT 23:30) – Important –Forecast (0.4%) –Previous (0.4%).

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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