All attention to Jackson Hole

Disappointing statistics from the US did not allow the dollar to strengthen on the opening day of the symposium in Jackson Hole. Sales of new homes in August fell by 1.7% compared to July, while experts expected growth. The level of business activity of the Federal Reserve Bank of Kansas fell sharply from 22p. up to 10p, repeating the trajectory of a similar indicator of Philadelphia, which may indicate a slowdown in activity across the country.

Markit confirms this conclusion - the growth of activity in the services sector, and in the industrial sector is slowing down. Lower August figures compared to July indicate GDP growth at the end of the year in the region of 2.5%, not 3.0%, as was supposed a month ago, the figures for hiring labor and on unfinished orders are decreasing, companies report an expansion of actions to cut expenses . In general, the conclusion is confirmed that the US economy is preparing to slow down this fall.

Trade talks between the US and China ended, it seems, to no avail, the escalation of the trade war is almost inevitable.

Today the key event of the day is the appearance in the Jackson-Hole of Fed Chairman Jerome Powell. The tribune of the symposium has traditionally been used by the heads of the world's leading CB to explain its position regarding the regulation of monetary policy, and sometimes leads to serious movements in the markets. Also pay attention to the July report on orders for durable goods, with a high probability, it will also show a decrease in activity and may provoke a sell-off of the dollar.

Eurozone

The PMI Markit indexes for the eurozone in August look even slightly higher than for the US, at any rate, it is not expected that GDP growth will slow down by the end of the year. In conjunction with the start of the ECB's exit from a soft monetary policy, the equalization of inflation and GDP growth between the US and the euro zone is clearly in favor of the euro, which has been under pressure for quite some time.

Some concern may be caused by the slowdown in consumer confidence, which the European Commission has noted since the beginning of the year, but this is quite natural, with a change in monetary policy and in the near future will not exert appreciable pressure on the euro.

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In anticipation of news from Jackson Hole, the euro is trading in a range, during the day, an attempt to storm resistance 1.1620 is possible, but for its successful implementation, a new stimulus is needed, which is not yet available.

United Kingdom

In the absence of significant macroeconomic news this week, the pound is under pressure due to the growing threat of a "hard" Brexit, as the positions of the UK and EU on a number of key issues remain different, and by the October summit, the parties risk coming without any preliminary agreements.

At the same time direct losses of the budget, according to the head of the British Ministry of Finance Philip Hammond, can reach up to 100 billion pounds within 10 years. Now there is no threat to the budget, the current account deficit is 3.4% of GDP and is decreasing, but indirect losses can increase significantly in the near future.

In the quarterly inflation report, the Bank of England points to a noticeable slowdown in investment in business. Both large and small businesses after the referendum in 2016 reduce activity, while business proceeds from the fact that the deal will still be concluded. If, however, no agreement is reached, lending will go to the negative zone, which in the end will not allow the Bank of England to move to a policy of normalization.

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In May, BoE proceeded from the fact that Brexit is becoming an increasingly less important factor hampering the growth of investments in business, it was to this conclusion that a group of bank experts came. However, now the threat of a tough Brexit again becomes the main threat to investment growth, and hence, to the plans of the Bank of England.

All these factors lead to a reassessment of risks for the pound and will contribute to its further reduction. Today the pound is trading in the range, the probability of testing the high at 1.2935 is low, but as of the end of the week GBPUS will go below 1.2800.

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US and PRC, the battle of the Titans

The inability of the US and China to agree on trade duties puts the risk not only to the economies of the two largest economically developed countries, but also of the world economy.

The second day of negotiations between China and the US ended with new threats against each other and the announcement of "fresh" trade duties. All this indicates that America is still confident that it will be able to emerge victorious in the trade struggle, hoping for strong economic growth. At the same time, China seems to be confident that it will be able to withstand pressure. And while they are sure of this, the trade war will continue until one of them asks for mercy. This approach threatens that the growth of the world economy may be in question, and the US and China themselves will begin to experience a slowdown in their economies. But then it will be too late to negotiate, as the crisis phenomena can grow into something more serious and become a prologue to a new global economic downturn, which can be much harder and more destructive than it was in the last crisis of 2008-09.

The lack of positive in the negotiation process again supported the dollar, which is still in favor due to a clear signal from the Fed that interest rates will be raised at the meeting on September 26, most likely for the next 0.25%. According to the dynamics of futures on the rates for Federal funds, this probability is considered as 98.4%. We expect that the trade war and raising the cost of borrowing the Fed will support demand for the dollar.

Today, the market's attention will be turned to the speech of J. Powell, the head of the Federal Reserve at the economic forum in Jackson Hole. It can be assumed that if he there once again expresses the need to raise rates, the rate of the US currency will continue its smooth growth against all major currencies without exception.

Forecast of the day:

The EURUSD pair remains in a bearish short-term trend. Its inability to grow above the level of 1.1585 could lead to the fact that it will continue to decline first to 1.1500, and then, probably, to 1.1445.

The AUDUSD pair adjusted upwards on the background of profit taking. The absence of a positive outcome in the negotiations between the US and the PRC will lead to the pair continuing to decline to 0.7200.

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