Market Jitters ahead of Jackson Hole

Anxiety ahead of Jackson Hole: Bond yields moved back up again yesterday and equities moved lower ahead of key speeches at the Jackson Hole by Fed governor Jerome Powell and ECB President Lagarde later today. Markets are again pricing a more than 50% probability that the Fed and ECB will both hike again by November.

Expect a Hawkish Market Reaction After Powell's Address Tonight

We expect a hawkish market reaction after Powell’s address tonight. He’ll put the tone on keeping rates at peak levels for an extended period of time. June dots and July FOMC Minutes clearly show a preference to hike policy rates one more time, which the Fed chair might flag.

USD/JPY Breaks Above 146, Tokyo Core CPI Dips to 2.8%

USD/JPY has posted small gains on Friday, enough to push above the symbolic 146 line. On the data calendar, Tokyo Core CPI dipped lower and Fed Chair Powell addresses the Jackson Hole Symposium later today.

Crypto Market Tamed on the Lower Ladder

Thursday’s sell-off in the US stock market forced cryptocurrencies to bounce back from the previous day. As a result, the crypto market capitalisation is back at $1.05 trillion (-1.8% in 24 hours). Solana (-5.2%) and XRP (-3.3%) led the decline among the top altcoins, while Ethereum held up relatively well, losing 1.3%.

Sunset Market Commentary

“We will keep at it until the job is done”. Fed chair Powell’s long-awaited speech at the Jackson Hole Symposium by the Kansas City Fed finally arrived. His message is the same as last year when he scared markets in an eight-minute address that the Fed will stick to a restrictive monetary policy.

Is the Price of Natural Gas Forming a New Trend?

The US Energy Information Administration said on Thursday that natural gas inventories in US storage rose by 18 billion cubic feet in the week ended Aug. 18. That was below the 29 billion cubic feet increase forecast by analysts polled by S&P Global Commodity Insights.

Final July Euro Area Inflation

EUR/USD is still range bound around the 1.09 mark as has been the case for most of this week. Yesterday was a rather quiet session, and global risk sentiment continues to be the main driver of the cross, together with the rise in especially long US yields - probably driven by a confluence of factors like a large supply of Treasuries, better-than-expected economic data, US credit rating downgrade and BoJ's relaxation of the YCC.

Dollar Gained Some Ground But Failed to Really Gain Momentum

The dollar gained some ground but the greenback failed to really gain momentum. The trade weighted dollar (DXY) tested the July high at 103.57 but a break didn’t occur. EUR/USD 1.0834 support is close, but not tested yet. The combination of higher (real) rates and a difficult risk environment stays USD-supportive especially with a September Fed rate hike -our preferred scenario – only partly discounted. Today’s eco calendar is extremely thin with UK retail sales being the only highlight.

British Pound Edges Lower on Soft Retail Sales Report

The weather in the UK continues to have a major impact on consumer spending. The June retail sales report was stronger than expected, with record-hot weather contributing to an increase in spending. July brought cold and rainy weather, which led to a decline in spending as shoppers preferred to stay home. Retail sales declined -1.2% m/m in July, down from +0.6% in June and below the consensus estimate of -0.5%.

Australian Dollar Lower on Evergrande Bankruptcy

It has been all red for the Australian dollar, as AUD/USD has closed lower for eight straight days and declined 230 basis points during that time. The downswing has continued on Friday, as AUD/USD is trading at 0.6390 in the European session, down 0.20%. There are no Australian or US releases today, so I expect a calm day for AUD/USD.