The US Dollar continued raging and rallying amid the Turkish crisis and also trade concerns but retreated on news that the US and China are talking again. Is it a correction will the trend continue? The Fed will have its say with the FOMC Meeting Minutes and the Jackson Hole Symposium. Here are the highlights for the next week.
The crisis in Turkey continued engulfing markets. The nation that bridges Asia and Europe saw the local currency struggle and triggered fears about European banks and other emerging markets. The safe-haven US dollar and Japanese yen competed for the first place while other currencies were beaten. The euro, pound, Aussie, and others reached multi-month low or more. In general, the tightening of financial conditions have hurt a vulnerable Turkey but could hit others. The gradual hikes by the Federal Reserve eventually take their toll. The mood around Turkey and other emerging markets overshadowed economic indicators. US retail sales beat expectations and the upward revisions did not hurt it too much. The US and China decided to resume talks and find a roadmap in the news that improved the mood and allowed the safe-haven US dollar to retreat. In the UK, fears of a no-deal Brexit persist, while euro-zone Q2 GDP growth was upgraded to 0.4%.Updates:
- Existing Home Sales: Wednesday, 14:00. Most sales of homes are of second-hand homes. The annualized level of sales stood at 5.38 million in June, slightly below previous levels. We could see a small bounce now: 5.44 is projected.
- FOMC Meeting Minutes: Wednesday, 18:00. The Federal Reserve decided to leave interest rates unchanged in its latest meeting but remained optimistic about the economy and left the door wide open for a rate hike in September. There has been no reference to trade in the statement. In the past meeting minutes, the FOMC did express concern about international commerce in its minutes. Markets will be on watch to hear if anything can slow the Fed down. In addition, comments about inflation and the recent strong GDP growth figures will be watched.
- ECB Meeting Minutes: Thursday, 11:30. The European Central Bank maintained its dovish stance in its July meeting. President Mario Draghi clarified that the Bank will not raise rates before September 2019, putting an end to speculation that an increase may come earlier. The Frankfurt-based institution is also worried about tariffs. The meeting minutes will reveal more information about their way of thinking and if they have become more optimistic about inflation or worried about growth and trade. The stance will likely be somewhat dovish, but this is priced in.
- US New Home Sales: Thursday, 14:00. While sales of new homes form only a minor part of the total market, each deal creates a wider array of economic activity and is well-correlated with the broader economy. The annualized level of sales stood at 631K in June. A similar number is on the cards now: 651K.
- US Durable Goods Orders: Friday, 12:30. This important economic indicator provides information for the Fed about investment and long-term moves in the economy. Headline orders rose by only 0.8% in June according to the final read. Core orders ticked up by 0.2%. We will now get the initial estimate for July, the first month of Q3. The figures also feed into GDP. Headline orders are expected to drop by 0.3% while core orders carry expectations for +0.5%.
- Jackson Hole Symposium: Thursday and Friday, with the keynote speech from Fed Chair Jerome Powell most likely late on Friday. The annual gathering of central bankers in Wyoming usually produces headlines for future policy moves. Former Fed Chair Ben Bernanke and current ECB President Mario Draghi used the venue to signal policy changes. Will Powell move markets? His straightforward style may certainly prove to be market-moving.
*All times are GMT
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