19 Aug: Stocks firm, Euro pressured by hopes of an ECB easing. Jackson Hole in focus this week.

By | August 19, 2019

European and US stocks generally rallied strongly on Friday on growing expectations that the ECB will cut interest rates in September, following the comments from the Bank of Finland and ECB commissioner Olli Rehn during the previous session. Olli Rehn, who sits on the ECB’s rate-setting committee as governor of Finland’s central bank, said on Thursday that the slowing global economy would see the ECB rolling out fresh stimulus measures that should include “substantial and sufficient” bond purchases as well as cuts to the bank’s key interest rate. The dollar also rallied but then pared some of its gains later in the day after a report in the Der Speigel magazine said that the German government was prepared to take on new debt to lift the economy. Germany’s Finance Ministry declined to comment on the report.

Stocks provided the main action of the day and ended generally up by around 1.2%/1.7%, on the increasing hopes of a substantial package of stimulus measures from the ECB, while in the FX markets, the Euro ended only slightly lower against the US$, which itself was mixed/unchanged against most of the other counterparts. Sterling made some decent gains, especially against the Euro as traders seemed to take a positive view of growing opposition from political parties to UK PM Boris Johnson’s promise to take Britain out of the EU, with or without a deal. However, the UK PM will meet Angela Merkel and Emmanuel Macron this week to inform them of his intention to leave the EU on 31 October, which may take some of the wind out of Sterling early in the coming week. The following week they will all meet again at the G7 meeting.

In other markets, the metals lost some ground because of the firming US$, while WTI was choppy but ended the day pretty much unchanged.

The coming week is a bit thin in terms of data, with the highlights being the Minutes from the recent meetings of the RBA (Tue) and the FOMC (Wed) meetings, while the global flash PMIs will be released on Thursday.  otherwise, all eyes will be on the Jackson Hole Symposium (Thur/Fri) along with the headlines coming from the meeting of the world’s leading central bankers. With global interest rates moving to historic low levels, the pressure is going to be on Fed Chair Powell to clarify the Fed’s intention when it comes to its own interest rate cuts. Traders will be searching for clarity on whether the Fed is in a serious longer-term cutting cycle, or just planning a few cuts as an insurance policy against an economic downturn. Until Friday, when Powell speaks, we could be in for some choppy, sideways conditions.

Monday will kick off with the NZ Q2 PPI (exp 0.7%, -2.9%yy) and then the only other item on the agenda will be the EU CPI (CPI, exp -0.4%mm, +1.1%yy; Core, exp +0.9%yy). Have a good day.

Economic data highlights will include:

Mon: NZQ2 PPI, Japan Merchandise Trade Balance, EU Current Account, CPI

Tue: RBA Minutes, German PPI, EU Construction Output, UK CBI Distributive Trade Survey – Orders, Global Dairy Trade Index, API Weekly Crude Oil Stock Inventory, Fed’s Quarles Speech

Wed: WBC Leading Index, NZ Credit Card Spending, UK Public Sector Net Borrowing Requirements, US Existing Home Sales, EIA Crude Oil Stocks Weekly Change, FOMC Minutes,

Thur: CBA Australian Flash Services/Mfg/Composite PMIs, Nikkei Mfg PMI, EU/US  Flash Services/Mfg/Composite PMIs, ECB Minutes, Jackson Hole Symposium, Kansas Fed Mfg Activity,

Fri: Jackson Hole Symposium, US New Home Sales, Fed’s Chair Powell

Market moves, in brief:

FX: DXY 98.20 (+0.05%)

Bonds: US10Y; 1.556% (+1.48%), German 10Y; -0.684% (+3.66%), UK 10Y; 0.46% (+13.91%), Australian 10Y; 0.891% (-0.96%), NZ 10Y; 1.010% (-1.46 %), China 10Y; 3.008% (+0.09%)

Stock Indices: DJI; +1.20%, S+P; +1.44%, NASDAQ; +1.67%, EuStoxx50; +1.41%, FTSE100; -0.71%, Shanghai Composite; +0.29%,

Metals: Gold $1514 oz (-0.65%), Silver $17.11 oz (-0.90%), Copper $2.587 lb (-0.31%), Iron Ore $93.61 per tonne (NYMEX) (-0.16%),

Oil: WTI $54.77 pb (+0.18%

CURRENCIES
EURUSD: 1.1092
Res  1.1105  1.1130  1.1155
Sup  1.1065  1.1045  1.1025
USDJPY: 106.35
Res  106.50  106.80  107.00
Sup  106.10  105.85  105.65
GBPUSD: 1.2143
Res  1.2175  1.2210  1.2245
Sup  1.2110  1.2075  1.2040
USDCHF: 0.9783
Res  0.9800  0.9815  0.9830
Sup  0.9745  0.9730  0.9715
AUDUSD: 0.6783
Res  0.6795  0.6810  0.6825
Sup  0.6770  0.6755  0.6735
NZDUSD: 0.6429
Res  0.6445  0.6465  0.6485
Sup  0.6420  0.6400  0.6380
INDICES / COMMODITIES
S&P.fs: 2891.05
Res  2905.00  2925.00  2945.00
Sup  2870.00  2850.00  2830.00
DJ30.fs: 25910.00
Res  25970.00  26070.00  26160.00
Sup  25825.00  25735.00  25650.00
SPI200.fs: 6395
Res  6415  6440  6465
Sup  6375  6355  6330
XAUUSD: 1512.80
Res  1520.00  1540.00  1530.00
Sup  1505.00  1495.00  1485.00
XAGUSD: 17.10
Res  17.25  17.40  17.55
Sup  17.05  16.90  16.75
WTI.fs: 54.83
Res  55.35  55.95  56.50
Sup  54.20  53.75  53.15