By Deepta Bolaky
It was another tumultuous week where we saw a rout in the equity markets while the bond market rallied. The immediate flight for safety caused the US and UK’s yield curve to invert and drove the 30-yr US Treasury Yield to a record low. Gold bolstered higher as recession fears gripped the markets.
The week ahead will see the global markets transfixed on the gathering of Jackson Hole in Wyoming for the Economic Policy Symposium sponsored by the Federal Reserve Bank of Kansas City.
The 2019 Economic Symposium, “Challenges for Monetary Policy,” will take place August 22 – 24, 2019.
The symposium is a must-watch for market participants as the most influential central bankers, finance ministers, academics, and other financial participants from around the world will meet to discuss the future policy decisions and challenges faced across the globe.
As recession fears remain in focus, market watchers will be paying close attention to the Fed Chair, Jerome Powell’s speech for those hoping to get further insight into the Federal Reserve’s next move.
The release of the FOMC minutes ahead of the symposium will be worth monitoring for clues on the decision dynamics of the July rate cut. Even though the minutes could be outdated as the Fed has yet to factor in the recent developments, it could prepare the markets for Jackson Hole.
The renewed strength in the US dollar due to the not-so-dovish central bank could be reversed by the Fed speakers if they act on what is happening in the bond market rather than keep monitoring lagging hard economic data like CPI, unemployment and GDP figures. The recessions fears and the worsening US-China trade war could force the hand of the Fed into a deeper-rate-cutting cycle.
It will be an eventful week for the Eurozone area. On the economic front, this week’s data will help the markets to monitor whether the inflation and PMI figures will justify the strong stimulus program signalled by the ECB in the July meeting:
Monday: Consumer Price Index
Thursday: Markit Manufacturing and Services PMI and ECB minutes
Italian politics could also play an essential role in driving European shares and the Euro this week. The political risks pose another headwind for the Eurozone area, which is already struggled with weak growth and negative interest rates.
The Prime Minister, Giuseppe Conte is expected to face a no-confidence vote on August 20.
The RBA Monetary Policy Meeting Minutes will be released on Tuesday. The local currency performed relatively well last week despite the risk-off sentiment that prevailed throughout the nearly the whole of last week.
The shock of the 50-basis point rate cut by the RBNZ had elevated expectations of a more aggressive RBA. Traders will be looking for more clues on future rate cuts. Given that the employment report came better-than-expected, the selling pressure of dovish minutes could be contained due to the drop in the chances of a September rate cut.
|Tuesday, 19 August 2019|
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