It was a relatively quiet and mixed week for the financial markets as traders awaited the Jackson Hole Economic Symposium. Traders leaned risk-on leading into the event, and then went full blast on risk after Powell’s speech on Friday. This reaction solidified the Comdolls as the top gainers and the safe havens as the biggest losers into the weekend.
Notable News & Economic Updates:
- China reports no new local Covid-19 cases for first time since July, as Delta outbreak wanes
- FDA grants full approval to Pfizer-BioNTech’s Covid shot, clearing path to more vaccine mandates
- Eurozone flash PMI holds close to 15-year high, job market booms
- Oil up 2% on brighter demand outlook and Mexican outage
- South Korea’s export rebound masks wider risks from Delta outbreaks
- Bank of Israel holds key rate amid virus surge
- Yuan eases as Fed, PBOC policies set to diverge
- Grayscale Bitcoin Trust FUD is now over as the last GBTC unlock totals just 58 BTC
- South Korea hikes interest rates, the first developed economy to do so in pandemic era
- US troops and Afghans killed in suicide attacks outside Kabul airport
- U.S. consumer spending slows in July; monthly inflation moderates
- Cuba to recognize and regulate crypto on the island
- New ECB strategy could reduce need for bond-buying, low rates
- Powell sees taper by the end of the year, but says there’s ‘much ground to cover’ before rate hikes
- Bug impacting over 50% of Ethereum clients leads to fork
Intermarket Weekly Recap
Dollar, Gold, S&P 500, 10-yr Treasury Yield, Oil, Bitcoin Overly 1-HourDollar, Gold, S&P 500, 10-yr Treasury Yield, Oil, Bitcoin Overly 1-Hour
The Jackson Hole Economic Symposium was the big scheduled risk event of the week, although it usually hasn’t been a big catalyst for volatility in years past. Still though, being a meeting of the world’s top monetary and financial policy figureheads, it’s an event most traders are well aware of and likely stayed relatively inactive in case there is a big surprise.
Since Jackson Hole didn’t start until Thursday, market price action among the different asset classes was mixed, but seemed to have started out with a uniform “risk-on” lean on Monday, possibly a reaction to net positive covid-19 related headlines (e.g., China reports no new local Covid-19 cases for first time since July, FDA grants full approval to Pfizer-BioNTech’s Covid shot). This positive sentiment persisted for the rest of the week, despite the latest business sentiment data showing arguably declining optimism around the globe.
Risk-on sentiment kicked into overdrive on Friday after Fed Chair Jerome Powell gave his speech at the Jackson Hole event, effectively re-iterating that the Fed was a long way away from raising interest rates and that there was still no rush to tapering bond-buying operations. The U.S. dollar and bond yields immediately fell on that sentiment, lifting all other asset classes, including counter currencies and gold.
Oil was a big outperformer, likely on the latest positive covid-19 updates, and arguably on Middle East tensions (U.S. on alert for more Kabul attacks, says next few days will be most dangerous) and the potential for oil operation disruptions in Gulf of Mexico from Hurricane Ida.
Crypto assets diverged from the risk-on sentiment influence, and from a heavy flow of arguably bullish headlines from the crypto space (e.g., PayPal launches its cryptocurrency service in the UK, Citi considering bitcoin futures trading for some institutional clients, Europe’s First Bitcoin Futures to List on Eurex in September, etc.) by moving lower early in the week. This broad pullback could have been a technical retracement after the massive recovery from the July lows, but it looks like the Jackson Hole reaction is helping the crypto space recover some of its earlier losses for the week.
In the forex space, there weren’t any major catalysts for currencies outside of the Jackson hole meeting, which is likely why we saw the Comdolls riding the positive risk sentiment wave to wins for the week. The Kiwi took the top spot, likely with help from positive economic from New Zealand, while traders ran from the savings, with the Japanese yen taking the biggest hits of the week.
USD Pairs
- U.S. Private sector expansion slows sharply amid capacity
- constraints and Delta variant spread
- U.S. new home sales creep up; supply, prices remain constraints
- U.S. Mid-Atlantic Manufacturing Activity Slowed Sharply in August — Richmond Fed
- U.S. core capital goods orders flat; shipments increase further
- Weekly jobless claims hold around pandemic-era low; GDP revised higher to 6.6%
- Bullard says the Fed has to ‘get going’ on the taper, may need to get aggressive to stop inflation
- Fed’s Esther George says it’s time to start easing off on policy juice
- Key U.S. inflation gauge rises 3.6% from a year ago to tie biggest jump since the early 1990s
- Fed’s Mester says taper should begin this year, end middle of next
- Fed’s Powell holds fast to ‘this year’ timeline for bond-buying taper
- The Supreme Court will allow evictions to resume. It could affect millions of tenants.
- UK recovery loses momentum as supply constraints hit output growth in both the manufacturing and service sectors
- UK Manufacturing output growth eases, while stock adequacy hits new record low – CBI
- UK Retail sales and orders growth soar but supply issues mount – CBI
EUR Pairs
- Growth in French business activity eased in August -PMI
- German private sector stays on growth path in August -PMI
- Euro zone business boom roared on in August -PMI
- German final GDP upgraded from 1.5% to 1.6% in Q2
- German business sentiment declined again in August
- German GfK consumer climate index at -1.2 vs. -0.5 forecast
- ECB minutes: New forward guidance does not necessarily mean low interest rates for longer
CHF Pairs
- Swiss order COVID-19 booster doses, mull more restrictions
CAD Pairs
- Canadian corporations’ net income before taxes, seasonally adjusted: $105.5B Second quarter 2021
- Canadian Payroll employment rose by 214,800 (+1.3%) in June
- The Canadian Industrial PPI fell 0.4% m/m in July, and was up 15.4% y/y. Raw Materials Price Index (RMPI), was up by 2.2%
NZD Pairs
- New Zealand headline retail sales up 3.3% in Q2 vs. 2.4% forecast
- RBNZ Assistant Governor Hawkesby: Rate changes not tied to lockdowns
AUD Pairs
- Australia manufacturing PMI slows in August – Markit
- Australia construction work rises 0.8% in Q2, misses forecasts
- The CB Australia Leading Index increased 0.5% in June 2021 to 116.4
- Australian private capex up 4.4% vs. expected 2.7% gain
- Australia retail sales plunge in July, economy set to shrink
JPY Pairs
- Japan’s private-sector activity hit by COVID-19 surge – PMI
- Bank of Japan Core CPI y/y: +0.20%
- Japan Services PPI for July: +1.1% vs. 1.3% forecast
- Tokyo core consumer prices stop falling for 1st time in 13 months
- Japan further expands virus emergency areas as cases surge
- Japan’s consumer price falls narrow on global commodity inflation
