The Week Ahead – Jackson Hole Symposium and Powell in the Spotlight

On the Macro

It’s an important week ahead on the economic calendar. With hawkish Fed bets hitting the markets, the Jackson Hole Symposium and Fed Chair Powell will be the focal point. However, prelim private sector PMIs and the German economy will also set the stage ahead of the next round of central bank monetary policy decisions.

For the Dollar:

Prelim private sector PMIs for August will move the dial on Wednesday. We expect the Services PMI to have more impact. However, investors must consider the sub-components, including new orders, employment, and input/output prices.

On Thursday, core durable goods orders and the weekly jobless claims figures will also influence. Another fall in initial jobless claims would test further the softer labor market theory.

Michigan consumer sentiment numbers will wrap up the week on the economic data front.

While the economic indicators will draw interest, the Jackson Hole Symposium will be the focal point on Thursday and Friday, with Fed Chair Powell wrapping up the week later in the session. Sentiment toward the US economy and forward guidance on interest rates will be the main drivers for the week.

The hotter-than-expected US Retail Sales and an FOMC Committee open to further rate hikes suggest a pre-warning of a September Fed rate hike.

For the EUR:

It’s a busy week for the EUR. German producer price index numbers kickstart the week on Monday. A further decline in producer prices would support the grim outlook for the German economy.

However, prelim private sector PMIs for France, Germany, and the Eurozone will have more impact on Wednesday. A more marked contraction across the manufacturing sector and a further slowdown in service sector growth could test bets on further ECB rate hikes.

German GDP and Ifo Business Climate Index figures wrap up another busy week on Friday.

Investors should also consider ECB commentary throughout the week. ECB… are on the calendar to speak.

For the Pound:

It is a quieter week for the Pound. However, prelim private sector PMI numbers for August could decide the fate of the next BoE monetary policy decision. The market focus will likely be on the services PMI. A contraction across the services sector would reignite fears of a UK economic recession.

With the economic calendar on the light side, investors should track BoE chatter throughout the week. No MPC members are on the calendar to speak, leaving BoE chatter with the media to influence.

For the Loonie:

It is a relatively busy week for the Loonie. Retail and core retail sales will be the focal point on Wednesday. The jury is still out on the September interest rate decision. A pickup in consumer spending could incentivize the Bank of Canada to hike rates further.

Other economic indicators include new house prices and wholesale sale figures. However, these will likely play second fiddle to the retail sales report.

Out of Asia

For the Aussie Dollar:

It is a quiet week ahead for the Aussie Dollar. There are no Australian economic indicators to provide direction.

The lack of economic indicators will leave the Australian dollar in the hands of China and stimulus news.

For the Kiwi Dollar:

It’s a quiet week for the Kiwi Dollar. However, retail sales numbers for the second quarter will need consideration on Wednesday. The RBNZ left interest rates unchanged at 5.5% last week. After lifting rates for 12 consecutive meetings before last week’s hold, a sharp increase in retail sales could test the theory of an extended pause.

Beyond the numbers, China-related news and stimulus plans will also move the dial.

For the Japanese Yen:

It is another busy week for the Japanese Yen. Prelim private sector PMI numbers for August will draw interest on Wednesday. We expect the Services PMI to have more impact.

However, Tokyo inflation numbers for August will garner more interest. The Bank of Japan remains ultra-loose despite the tweak to the Yield Curve Control policy. Softer inflation numbers would leave the BoJ in a holding pattern.

Out of China

After another dire week for the Chinese economy, the PBoC will the deliver loan prime rate decisions on Monday.

Economists forecast the PBoC to drop the 5-year LPR from 4.2% to 4.05% and the 1-year from 3.55% to 3.40%. However, the markets need to be convinced of further stimulus to ease the fear of a more marked slowdown in growth.

Investors should monitor the news wires for stimulus-related chatter from Beijing.