August 26, 2022

“Markets are rather quiet this morning as they look for guidance regarding the magnitude of the September rate hike, which will be delivered by FOMC Chairman Jerome Powell at the annual Jackson Hole Symposium. A hawkish statement is likely to cause the dollar to rise”

Sam Cornford, Partner – Head of Trading

Main Headline

Washington and Beijing are close to an agreement that would allow US regulators access to audits of Chinese companies that are listed on American exchanges, a potential breakthrough in talks that have languished for more than a decade. Bankers in Hong Kong were informed of a possible deal this week. This happens as US lawmaker on the Senate Commerce and Armed Services committees arrived in Taiwan on Thursday on the third visit by a US dignitary this month, defying pressure from Beijing to halt the trips.

Liz Truss is considering plans to trigger “Article 16” proceedings against the EU over the Northern Ireland protocol within days of entering Downing Street if she succeeds Boris Johnson as prime minister next month, according to several government insiders. The UK and Brussels are locked in a fractious legal stand-off over implementing the deal covering post-Brexit trading arrangements in Northern Ireland, which has soured EU-UK relations since it came into force in January 2021.

GBP

Sterling is weaker than most major currencies in the early morning trade. Britain’s energy regulator announced today it will raise its main cap on consumer energy bills to an average £3,549 from £1,971 a year, as campaign groups, think tanks and politicians call on the government to tackle a cost-of-living- crisis. It covers around 24 million households. The 4.5 million households on prepayment plans face an increase from £2,017 to £3,608. Consultancy Cornwall Insight forecasts the cap could rise to £4,649.72 in the first quarter of 2023 and to £5,341.08 in the second quarter before coming down slightly to £4,767.97 in the third quarter.

EUR

Euro is stronger against Sterling and weaker against the Dollar this morning. Spiralling inflation has sparked a cost-of-living crisis across Europe, and governments are stepping in to try to shield households and businesses from the seemingly never-ending surge in energy prices. Inflation jumped to a new all-time high of 8.9 per cent in July in Europe for the 19 countries bound by the euro, fuelled by rising energy costs. For many families these days, it feels like paycheques are immediately evaporating as inflation drives up the cost of groceries and fuel, landlords increase rent and utility bills keep soaring.

USD

The Dollar is well bid against most major currencies overnight. Second-quarter GDP contraction revised to 0.6% from 0.9% Gross domestic income rises at 1.4% rate in Q2 Average of GDP and GDI climbs at 0.4% pace Weekly jobless claims drop 2,000 to 243,000. The US economy contracted at a more moderate pace than initially thought in the second quarter as consumer spending blunted some of the drag from a sharp slowdown in inventory accumulation, dispelling fears that a recession was underway.

Markets

S&P 500 and Nasdaq 100 contracts were in the red after Wall Street’s rally yesterday. Treasuries retreated, taking the US 10-year yield to 3.07%. In addition to Powell’s speech later today, traders must keep an eye on a raft of US data, including personal spending and the Fed’s preferred measure of inflation, both of which are expected to show price pressures cooling. Stocks in Europe erased gains to set the benchmark Stoxx Europe 600 index on track for a second weekly drop, with media and travel the biggest decliners.

Main Economic Data/Central Banks/Government (All Times CET)

8:00 a.m.: Germany Sept. GfK consumer confidence
8:00 a.m.: Sweden July PPI
8:00 a.m.: Denmark July retail sales
8:45 a.m.: France Aug. consumer confidence
10:00 a.m.: Eurozone July M3 money supply
10:00 a.m.: Italy Aug. manufacturing confidence, economic sentiment
2:30 p.m.: US July PCE deflator, personal spending and income
4:00 p.m.: Fed’s Powell speaks at Jackson Hole
7:00 p.m.: Baker Hughes US rig count

Corporate Events

Nigeria GDP
UK energy regulator Ofgem announces new energy price cap for households

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