Forecasting the Coming Week: Recession concerns take over Fed’s easing

A dreadful week saw the US Dollar (USD) collapse to new yearly lows in the sub-101.00 region as investors continued to price in the likelihood of further and maybe deeper rate cuts by the Federal Reserve in the latter part of the year. The latter was bolstered by Fed officials and the dovish message from Chief Powell at the Jackson Hole event on Friday.

The US Dollar Index (DXY) dropped to a 13-month low in the 100.70–100.65 band towards the end of the week, reflecting increasing bets on interest rate cuts in the latter part of the year. Durable Goods Orders kickstart the week on August 26, seconded by the FHFA’s House Price Index and the Consumer Confidence gauge by the Conference Board, both due on August 27. The weekly Mortgage Applications tracked by MBA and the EIA’s report on US crude oil inventories are due on August 28. The weekly Initial Jobless Claims, another revision of the Q2 GDP Growth Rate, advanced Goods Trade Balance, and Pending Home Sales will all be published on August 29. Closing the week come the PCE, Personal Income, Personal Spending, and the final Michigan Consumer Sentiment print.

EUR/USD rose for the fourth week in a row and managed to test levels last seen in the summer of 2023, just shy of 1.1200 the figure. Germany’s IFO Business Climate comes on August 26, followed by the final Q2 GDP Growth Rate in Germany expected on August 27. Still in Germany, the GfK Consumer Confidence is due on August 28. The EMU final Consumer Confidence is due on August 29, along with the final Inflation Rate in Germany. On August 30, Retail Sales and the release of the labour market report in Germany are due, followed by the flash Inflation Rate and the Unemployment Rate in the euro bloc.

The continuation of the strong rally sent GBP/USD beyond the 1.3200 barrier for the first time since July 2022, amidst further selling in the Greenback. The Mortgage Approvals and Mortgage Lending are due on August 30.

USD/JPY resumed its downtrend and ended the week with marked losses near 144.60, reversing two consecutive weeks of gains following the sharp sell-off in the US Dollar. The final Coincident Index and the Leading Economic Index will be unveiled on August 28, prior to weekly Foreign Bond Investment figures on August 29. The Unemployment Rate, Retail Sales, flash Industrial Production, Consumer Confidence, and Housing Starts are all due on August 30.

AUD/USD flirted with two-month tops just below the 0.6800 hurdle, extending its recovery for the third straight week. On August 28, the RBA will publish its Monthly CPI Indicator, while Housing Credit and Retail Sales are due on August 30.

Anticipating Economic Perspectives: Voices on the Horizon

• The ECB’s Nagel is due to speak on August 27.
• The Fed’s Waller speaks on August 28, along with the BoE’s Mann.
• The Fed’s Bostic, the SNB’s Jordan, and the ECB’s Nagel speak on August 29.

Central Banks: Upcoming Meetings to Shape Monetary Policies

• The Hungarian central bank (MNB) meets on August 27.