The US$ is steady, oil prices rise, equity markets and US yields are mixed ahead of the Fed Chairs Jackson Hole speech. The US$ steadies as markets wait for the Fed Chair’s highly anticipated speech with analysts doubting that Fed Chair Powell will make any hints on tapering timelines. We see the potential for increased currency volatility should Fed Chair Powell make a more hawkish statement on tapering than the market is expecting. In other news, German import prices surge the most since the early 1980’s on supply chain issues. China is proposing new regulations to block ‘data-rich’ companies from US IPO’s. The US President advisers are considering recommending current Fed Chair Powell for a 2nd term. Covid, China greenlights covid booster shots for high-risk residents. South African vaccinations rise to record levels as it widens eligibility. US covid hospitalizations hit 8-month high, while Texas Gov is set to deploy 2,500 more out-of-state medical staff to fight the covid surge. In currency markets, we are seeing a mixed response with Asian currencies firming while western currencies are consolidating ahead of the Fed Chairs speech. CNY is up 0.1%, while Asian currencies strengthen 0.2% on average vs US$. Trading currencies are mixed with JPY & MXN are down 0.1%, NZD & ZAR flat while AUD & NOK are up 0.2% vs US$. Today US Personal Income & Personal Consumer expenditure data may have a minor impact on markets, but the Fed Chairs Speech remains the market key event.
Oil prices rise with Brent Crude retesting US$72pb as companies begin shutting production in the Gulf of Mexico ahead of a possible hurricane forecast to hit at the weekend. Brent crude is on track for a 10% rise in value this week, its biggest weekly jump since June2020. C$ holds below 1.27 vs US$ with the loonie finding support from strengthening oil prices as tropical storm Ida approaches the Gulf of Mexico. CAD Raw Material Price Index and Industrial Product Price out this morning will likely have a limited impact on C$. The key market driver remains the Fed Speech, our bias remains to buy US$ on dips. Support resets to 1.2635, while resistance resets to 1.2740, if breached look for 1.2810.
Euro holds 1.1750 vs US$ ahead of the Fed Chairs speech. The markets have been on hold pending the Fed Chairs Jackson Hole speech, but Euro has managed to hold on to its recent gains. Domestically German import prices m/m grew 2.2%, its largest increase in 4-decades, while y/y import prices grew 15% vs 12.9%. In Italy business confidence fell, but positively consumer confidence grew. Intraday Fed Chair Powell’s speech will dictate intraday direction. Support holds at 1.1660 next, while resistance resets to 1.1810.
EURGBP holds stead as markets will remain cautious until after the Fed Chairs comments tomorrow. Support resets to .8426 (1.1868) Feb 2020, if breached look for .8274 (1.2086) Dec 2019, while resistance holds at .8600 (1.1628).
GBP under pressure but clings to 1.37 vs US$ ahead of the Fed Chairs speech. Safe-haven US$ buying, rising Brexit related shortages, and increasing UK covid cases continue to keep the pound under selling pressure. Investors continue to monitor rising covid cases, but the government at this point are unlikely to undo “Freedom Day”, but consumer spending could fall as shoppers remain cautious. Intraday the Fed Chair comments will drive market direction. Support holds at 1.3630 and resistance remains at 1.3780.