Yesterday, the euro and pound fell along with the decline in German Flash Manufacturing PMI, which unexpectedly dropped below 50, followed by weaker-than-expected Flash PMI figures for both manufacturing and services sectors in the UK. This caused the euro, pound, and USD/JPY to decline, while bond yields also decreased. However, the stock market reacted positively to the diminishing expectations of additional rate hikes. If the US PMI Flash figures decline, there’s a response with dollar selling. The euro and pound rebounded in response. Ultimately, both the dollar and yen exhibited a back-and-forth pattern, and the direction was not clear.
However, it has become evident that the market reacts more sensitively to economic indicators than usual. The outlook for monetary policy is also influenced, making it a situation where developments depend significantly on data. According to the latest Reuters survey, most respondents expect a 25 basis point rate hike in the September Bank of England meeting. The prevailing view for the peak interest rate is 5.50%. In July’s survey, it was 5.75%, and in June’s survey, 5.50% was predominant, showing that the views are fluctuating with each survey.
Economic indicators to be released in the foreign markets later include Hong Kong Trade Balance (July), Turkish Central Bank Policy Rate (August), US Durable Goods Orders (Preliminary) (July), and US Initial Jobless Claims (08/13 – 08/19). The Turkish Central Bank is expected to raise the policy rate from the current 17.5% to 20.0%. US Durable Goods Orders are anticipated to drop from the previous +4.6% to -4.0% this time. However, excluding transportation equipment, a small slowdown is expected with a month-on-month increase of +0.2% compared to the previous +0.5%. New US jobless claims are projected to remain almost unchanged at 240,000, similar to the previous 239,000.
Regarding speech-related events, the Economic Symposium known as the “Jackson Hole Conference” will be held from today until the 26th. The attendance of BOJ Governor Haruhiko Kuroda has also been reported. The main focus will be on tomorrow’s speeches by Fed Chair Powell and ECB President Lagarde. However, it’s important to stay cautious as statements may be reported in a timely manner.
Tomorrow, Chair Powell’s speech is scheduled, and before that, it’s anticipated that USD will have limited significant movement.
If there’s movement, it could be after the release of the US Durable Goods Orders data. Keep an eye on the developments following that.”