This week saw recession worries return for the US, the UK, and the eurozone. This led to a large bid into bonds on Wednesday sending the USD, GBP, and EUR lower and lifting precious metals, gold and silver. To close the week, markets are waiting to hear from Jerome Powell speaking at the Jackson Hole Symposium at 3pm UK time. What markets want to know is whether or not Powell signals ‘job done by the Fed’. If he does, then yields could tumble further and gold could start another leg higher. All eyes are on Powell to close the week.
Other key events from the past week
- EUR: PMI miss, Aug 23: Hopes that the service sector would prop up the eurozone’s economy were dashed on Wednesday as services came in at 48.3 well below the minimum forecast expectations of 49.5. Is a deep recession ahead?
- GBP: Another PMI miss, Aug 23: UK PMI’s also missed minimum expectations which sent a worrying sign to investors about the state of the UK economy. Stagflation fears are likely to re-emerge & pressure the GBP moving forward.
- USD: Yet another PMI miss, Aug 23: It was a hat trick for weak PMIs this week. US manufacturing and services PMIs came in below the market’s minimum expectations. As a result, there was a large bid into bonds which helped lift gold. However, will Powell’s speech on Friday affirm or contradict those worries over US growth?
Key events for the coming week
- USD: Inflation focus, Aug 31: The Core PCE is the Fed’s preferred measure of inflation. Expect significant volatility around stocks, gold, and the USD on the release. A big miss here, and gold would likely surge higher.
- Seasonal Insights: Can the USDJPY keep moving higher in line with US Treasuries?
- USD: US Labour market, Sept 1: The Fed has been able to keep hiking rates in part due to a strong US labour market. Will the nonfarm payroll at 13:30 UK time on Friday show signs of a weaker-than-expected labour market? If it does, expect rate expectations to fall rapidly and US treasury yields to fall as well.