JASPER’S MARKET SQUAWK 25-08-2023
Initial Commentary from Jackson Hole Weighs On Markets
Narrative of high rates staying high through 2024 weighed on market sentiment and supported yields ahead of Fed Chair Jerome Powell’s speech at the Jackson Hole. US data also disappointed.
Chart: GBPUSD
Key Factors for Today
- Jackson Hole Commentary Triggers Market Response
- Nasdaq Reflects Disappointing US Data, Hike Expectations
- ECB Dovish Tilt Impacts EUR/USD, Drops Below $1.08
- UK Retail Data Adds to Cable’s Decline, Pound Falls 1%
- Yen Weakens on Tokyo Inflation, Approaching 2023 Lows
- Natural Gas Spikes 10% as Potential Strike Shakes Market
Rates High For Longer, Durable Goods Disappoint
In an interview in the context of the Jackson Hole Symposium, FOMC member and voter Patrick Harker said he saw rates staying at the current level through the rest of the year. Fed executive (and non-voter) Susan Collins communicated that another rate hike might be needed and insisted that rates would have to be held high for a long time. Yields rose as US preliminary durable goods disappointed and accelerated the dollar’s upside, with orders at -5.2% falling faster than the -4.2% expected. Nasdaq traded higher on Nvdia’s earnings beat but reversed for a 3.25% loss.
ECB Officials Tilts Dovishly, EUR/USD Below $1.08
Commentary from ECB officials on the sidelines of the Jackson Hole meeting skewed somewhat dovish, with ECB official Mario Centeno (Portugal) urging caution about further rate hikes. Noted hawk Boris Vujcic (Croatia) provided an easier outlook, suggesting that core inflation likely peaked, but it remained to be seen if rates were restrictive enough. Another notable hawk, Joachim Nagel (Germany), said he would wait for more data before deciding whether a hike in September was necessary but said it was too early to talk about a pause. With the dollar on the rise, EUR/USD dropped 0.48% to $1.0810 and continues its descent towards $1.0760 early Friday.
UK Retail Data Add to Cable’s Decline, 1% Down
Aug GfK consumer confidence survey was better than expected at -25 compared to the -29 forecast and registered the largest rise since April. August CBI retailing reported sales slipped to -26 from -25, the largest drop in two years. Cable, pressured by a firmer dollar and Wednesday’s poor PMIs, cratered 1% lower to $1.26, opening the door to $1.25 unless bulls can reclaim $1.2620. Meanwhile, markets anticipate Ofgem’s energy price cap reduction that could help ease inflationary pressures, with the announcement expected during the session.
Yen Weakens on Tokyo Inflation, Heads For 2023 Lows
CPI change in Tokyo was slightly below expectations at 2.9% compared to 3.0% forecast and down from 3.2% prior to hitting the slowest pace since September of last year, leading to lower yields in Japanese debt and weighing on the currency. Core-core CPI remained unchanged, as expected, but the USD/JPY did experience a 0.71% run up to 145.80 on Thursday, with bulls propelling prices towards the peak of 146.60.
Natural Gas Spikes ~10% on Potential Strike
Weekly EIA natural gas inventories grew slower than expected, up 18B cf compared to 33-34B cf forecast. Still, Natural gas prices jumped nearly 10% higher after workers at Australia’s Woodside LNG plant planned a strike at the world’s largest gas exporter. Despite agreeing in principle to a deal, the commodity remains bid early Friday, eying $2.80 cf and perhaps even $3 cf while above $2.60 cf.
On The Docket
- German GDP Growth Rate
- German Ifo Business Climate
- Michigan Consumer Sentiment
- Fed Chair Powell’s Speech
- ECB President Lagarde Speech
- Jackson Hole Symposium
- ES Consumer Confidence
FX 1-Day Relative Performance (USD)
- Aussie and Kiwi 0.16% and 0.33% lower
- Euro 0.24% down, Cableby – 0.23%
- Yen 0.18% lower, Swissy 0.19% down
- Loonie also down, by 0.09%
- Gold 0.32% down, Silver 0.60% lower
- Crude and Brent 0.4% and 0.36% higher
- Natural gas down by 0.53%
