Market Drivers – US Session, August 22

Mohamed Abdelhamid 23 August, 2023 6:14 am Forex Market, Global Stock Market, Market Update

The first indication of economic activity in August will come from the Global PMIs, which will also include housing data from the US, data on Q2 retail sales from New Zealand, and data on retail sales from Canada. After Monday’s decline, Asian equities have recovered, but caution is still in the air as a result of the People’s Bank of China’s smaller-than-anticipated interest rate cut.

The Jackson Hole annual symposium, commencing on Thursday, holds significant importance, with Fed Chair Powell’s speech on Friday. US yields edged higher, reaching new multi-year highs, with the 10-year yield surpassing 4.30%. US Existing Home Sales tumbled 2.2% in July to an annual rate of 4.07 million, falling below the market consensus of 4.15 million.

Economic Data

The Richmond Fed Manufacturing Index improved in August from -9 to -7, in line with market consensus. The impact of the recent resurgence in mortgage rates is becoming increasingly apparent, with existing home sales declining 2.2% during July, the second straight monthly decline. In the US, more housing data is due on Wednesday with New Home Sales, and the S&P Global PMI is scheduled to be released.

Key Developments

Losses were recorded on Wall Street’s Dow Jones, S&P 500, and Nasdaq, and cautious attitude predominated. Market mood is under pressure due to worries about China, fresh S&P downgrades of US banks, and predictions of sustained high interest rates.

EUR/USD initially rose to 1.0930 but then turned downwards, falling to test the support area at 1.0830. The Eurozone PMI data is due on Wednesday, with the Composite PMI forecasted to decline from 48.6 to 48.5. Weaker-than-expected numbers could weigh on the Euro. Eurostat will release the preliminary August reading of Consumer Confidence later in the day.

UK government borrowing came in below forecasts in July at £4.3 billion, £3.4 billion more than in July 2022. The budget deficit was £56.6 billion, £11.3 billion less than what the Office for Budget Responsibility had forecasted in March.

GBP/USD traded above the 20-day Simple Moving Average (SMA), but pulled back below 1.2750, consolidating with a bullish bias in the short-term. USD/JPY remains steady near 146.00 and above the key short-term area of 145.00, supported by higher US Treasury yields. USD/CAD continues to trade near monthly highs above 1.3550 with a bullish bias.

On Wednesday, Canada will release data on June retail sales, and on Tuesday, the AUD/USD finished far below daily highs. The NZD/USD recovered after finding support at 0.5900, peaking at 0.5970 before falling back to 0.5940. The Australian S&P Global Manufacturing PMI is predicted to remain unchanged at 49.6 and the Services PMI at 47.9. The price of cryptocurrencies decreased marginally, with Bitcoin down more than 1% to $25,800 and Ethereum roughly 3% to $1,625.

The primary focus of this week remains on central bankers’ speeches ahead of the Jackson Hole Symposium.

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