After a solid start into the week, equity markets took a quick dive yesterday as tensions keep mountint ahead of Jerome Powell speech on Friday at the Jackson Hole Symposium. On Tuesday, E-mini S&P500 futures tumbled on the 2,932 resistance level (previous highs and Fibonacci 61.8% on July-August debasement) and fell 1.33% to 2,893 points. Across the Atlantic, equities moved in a similar fashion with the EuroSTOXX 600 falling 1.28% to 369 points. It is worth mentioning that since the mid-August sell-off, European equities are lagging almost 3% behind their US counterparts as the EU economy, and more specifically Germany, is showing signs of slowdown, if not of recession. We anticipate this divergence will accentuate in the coming months. In addition, the recent resignation of Italy’s Prime Minister Conti also weighted on equities as investors favoured less risky assets such as bonds.


 

Stay on top of the markets with Swissquote’s News & Analysis

 


However, the overall risk sentiment quickly improved on Wednesday as investors anticipate that Jerome Powell would deliver a dovish message at the occasion of its speech on challenges for monetary policy next Friday. A significant share of market participants anticipates that Chairman Powell would seize this opportunity to suggest another rate cut in September. Looking at OIS rate, markets are pricing in an 86% chance of a 25bps rate cut and 14% of a 50bps cut. Anything that would sound less dovish than that would likely trigger another sell-off in the equity market and further appreciation of the buck. Given how Powell struggled to justify the July rate cut, we believe it is inevitable that markets will be disappointed, as a 50bps cut is out of the table while a 25bps will be difficult to justify.

This report has been prepared by AC Markets and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by AC Markets personnel at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD turns below 1.10 as market mood eases

EUR/USD has dropped below 1.10 as the market mood improves. Earlier, it hit three-week highs as the stock market crash and rush into bonds is raising the chances of the US Fed cutting rates. Further coronavirus headlines are awaited.

EUR/USD News

GBP/USD hits new 2020 low amid Brexit rhetoric, coronavirus headlines

GBP/USD has dipped below 1.2850, hitting a new 2020 low as concerns about a no-trade-deal Brexit are weighing on the pound. Coronavirus-linked USD weakness is minimal in this pair.

GBP/USD News

XAU/USD tumbles near two-week’s lows, sub-$1600/oz

Gold has been dropping sharply this Friday while reaching the 200 SMA on the four-hour chart. XAU/USD bulls gave up as sellers took the market down sharply. The bears seem to be in charge and more down could potentially be expected. 

Gold News

WTI remains under pressure around $45.00

Nothing new around crude oil prices, with rising concerns on the Chinese COVID-19 and its potential impact on the economy and the demand for the commodity keeping traders’ sentiment well depressed.

Oil News

FXStreet launches Real-Time Trading Signals

FXStreet Signals offers access to explanatory live webinars, real-time notifications when signals are triggered and exclusive membership to the company’s Telegram group, where users get direct guidance by our analysts and get room to discuss and interact.

More info

Forex Majors

Cryptocurrencies

Signatures