Janet Yellen Takes Centre Stage Today
Today, all eyes will be on the US Federal Reserve (Fed) Chairwoman, Janet Yellen, as she takes the stage as keynote speaker at the annual economic policy symposium in Jackson Hole, Wyoming. Her choice of words today will be all the more significant as market players weigh up the pros and cons facing the US economy, and whether another near term interest rate increase in on the cards. Interestingly, Janet Yellen’s speech will follow closely on the heels of the latest US second quarter GDP data. The curtains will come down on the conference today with a panel discussion involving the Bank of Mexico Governor, Agustin Carstens, the European Central Bank Executive Board Member, Benoit Coeure, and the Bank of Japan Governor, Haruhiko Kuroda.
In other parts of the globe, the just released second estimate of UK’s GDP for the second quarter confirmed its preliminary figure. In Germany, the GfK’s consumer sentiment index showed that consumer confidence is likely to improve in September.
Pound Sterling – UK Markets
The Pound has regained its momentum against the greenback this morning and has bounced back above the crucial 1.32 handle, amid a corrective slide in the US Dollar, as market participants focus on the key risk event for the week i.e. Fed Chairwoman Janet Yellen’s speech, scheduled later today. Additionally, the just out data showed that the second estimate of the UK’s GDP for the second quarter confirmed its preliminary reading. Separately, the nation’s total business investment declined during the second quarter of this year. Moving ahead, investors look forward to the release of Britain’s consumer credit, mortgage approvals and construction PMI along with the nation’s GfK consumer confidence index data, all due next week.
Yesterday, the Confederation of British Industry’s (CBI) quarterly distributive trades survey data showed that the UK’s retail sales volume rose to a six-month high level in August. This comes as a welcome relief for British retailers who suffered their steepest drop in sales in four years last month, in a knee-jerk reaction to the Brexit vote.
US Dollar – US Markets
The US dollar is trading on a weaker footing against the Euro and the Pound this morning, ahead of a speech by the US Fed Chairwoman, Janet Yellen, at the Jackson Hole symposium later today, where she is expected to give cues on the timing of the next interest rate increase. Investor focus will also be on the second estimate of US GDP and core personal consumption expenditure data for the second quarter.
Yesterday, data showed that US durable goods orders posted its first rise in three months in July, as demand for machinery and a range of other products perked up from recent weakness, offering signs that the manufacturing sector could continue to gain traction in the second half of the year. In other economic news, the number of Americans filing for new unemployment benefits unexpectedly dropped last week, indicating sustained labour market strength. Separately, both the Dallas and Kansas City Fed Presidents opined that the case for increasing interest rate in the US is building up.
Euro – European Markets
The shared currency is trading mixed against the greenback and the Pound this morning. In Germany, GfK market research group’s forward-looking consumer sentiment index showed that German consumer confidence is expected to improve in September, signaling that their concerns over Brexit are short-lived. The indicator also registered its highest reading since June last year. The good news comes as a breather to Germany after witnessing a couple of disappointing data points this week - first the nation’s services PMI and then the Ifo survey. Meanwhile, in France, consumer confidence edged up in August. However, a second estimate of the nation’s GDP confirmed that French economic growth stagnated in the second quarter. Further, Eurozone’s private loans rose in line with investor expectations in July.
Yesterday, results of a survey by the Munich-based research institution, Ifo, showed that sentiment among German businesses slipped unexpectedly in August. While the business climate index dropped to a six-month low level, the current conditions and expectations index also surprisingly declined.
Other Currencies – Highlights
The Japanese Yen is trading higher against the US Dollar this morning, despite the release of disappointing consumer price index (CPI) data earlier in the session. This new found strength in the Japanese Yen is led by a broad-based weakness in the greenback. Data showed that Japan’s consumer prices dropped for the fifth consecutive month in July, making the Bank of Japan’s 2.0% inflation target look far elusive. Further, the nation’s core CPI registered its biggest annual fall in more than three years, as more firms delayed price increases due to weak domestic consumption. Although the slide in consumer prices were mainly attributed to a fall in energy costs, rise in imported food prices and hotel room rates also moderated during the period. This latest batch of gloomy data reinforces the view that deflationary mindset is still prevalent among Japanese consumers.
In other economic news, Japan’s services producer price index advanced above expectations to register its fastest pace of growth since August 2015 and rising for the 37th straight month.