Currency Point: Don’t wait for Jackson Hole



As I sit here and wait for the Jackson Hole Symposium it has dawn on me that it has been overhyped as it always is. Which means the ‘anticipation’ in FX markets is also probably overdone.

Looking at the consensus data on Refinitiv less than 40% of those surveyed believe Powell will lay out plans for taper to begin.

That pretty ease to argue, we get another non-farm payroll next week, we should be disappointed if the figure is less than 750- to 800,000 range couple this with CPI and the PCE data suggests that Powell can wait to the September Federal Open Markets Committee (FOMC) before making any form of announcement.

On the September FOMC it will be the first time a 2024 dot plot will be added to the Fed’s dot plots release – it will give us a better understanding of how many members see rate hikes in 2022, 2023 and at what rate we should expect in 2024 when rates should have moved.

So, lots to be mindful of going forward.

Busy week in data last week and need to list the big one as they did move the dial in the USD

  • US Q2 GDP’s rose to 6.6 per cent quarter on quarter in the second reading this was stronger than expected the prior read was 6.5 per cent – the big mover private consumption rising 11.8 per cent quarter on quarter.
  • Core PCE held at 6.1 per cent which is still 4.1 per cent above 2 per cent mandate.
  • Weekly initial jobless claims fell to 253,000, from 349,000.
  • New home sales rose 1.0 per cent in July this was a big miss on estimates at 3.4 per cent. However, the annualised rate was 708,000 which beat estimates at 697,000. Growth is slowing but overall new homes sales remain at historically strong levels.
  • Existing home sales continue strengthen hitting an annual pace of 5.99 million homes sold the median price is now US$359,000 up 17 per cent year on year.
  • Manufacturing PMIs slipped slightly to 61.2 from 63.4. While the Services PMI fell to 55.2 from 59.9. Both however are still above pre-COVID 5-year averages. What caught our eye was the Service PMI continued to note difficulty in finding suitable

Interesting to see that material exposed currencies have done well against the USD over the past week.

AUD/USD has moved off its $0.7134 low to be trading right back inside $0.72, it had slipped to $0.7230 at the end of the week and will be watched as US data drops this week.

NZD/USD jumped 0.9% to $0.695 on the RBNZ’s outlook. USD/CAD has fallen from $1.28 back to $1.259 as crude surged, but it too ease at the end of the week at $1.264

Looking across the Atlantic

EUR/USD is holding the $1.17 levels well, USD bulls just haven’t been able to push it through the $1.1720 support level. One to watch while GBP/USD also is holding the new $1.37 handle.

Big week this week and I suspect the USD will continue to win out in September.

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