Recession concerns overtake Fed easing

A dire week saw the US dollar (USD) crash to fresh annual lows in the sub-101.00 region as investors continued to price in the likelihood of further and perhaps deeper rate cuts by the Federal Reserve in the latter part of the year. The latter was supported by Fed officials and the conciliatory message from Chairman Powell at the event in Jackson Hole on Friday.

The US dollar index (DXY) fell to a 13-month low in the 100.70-100.65 band towards the end of the week, reflecting growing bets on interest rate cuts later in the year. Durable goods orders begin the week on August 26, followed by the FHFA’s Home Price Index and the Conference Board’s Consumer Confidence Index, both due August 27. Weekly MBA-tracked mortgage applications and the EIA’s US crude inventories report are due on August 28. Weekly initial jobless claims, another revision to the second quarter GDP growth rate, advanced goods trade balance and pending home sales will all be released on August 29. and the final print of Michigan Consumer Sentiment.

EUR/USD rose for a fourth consecutive week and managed to test levels last seen in the summer of 2023, just below 1.1200. Germany’s IFO Business Climate will be held on August 26, followed by Germany’s final Q2 GDP growth rate expected on August 27. Still in Germany, the GfK Consumer Confidence is scheduled for August 28. with the final inflation rate in Germany. August 30th is followed by retail sales and the release of the German labor market report, followed by the rapid rate of inflation and the unemployment rate in the euro bloc.

Continued strong rally sent GBP/USD past the 1.3200 barrier for the first time since July 2022 amid further selling in the dollar. Mortgage approvals and mortgage loans 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 a strong selloff in the US dollar. The final Coincident Index and the Main Economic Index will be released on August 28, ahead of the weekly foreign bond investment figures on August 29. The unemployment rate, retail sales, brisk industrial production, consumer confidence and housing starts are all due on August 30. .

AUD/USD flirted with two-month highs just below the 0.6800 mark, extending its recovery for a third consecutive week. On August 28, the RBA will release its monthly CPI gauge, while housing credit and retail sales are due on August 30.

Anticipating the economic outlook: 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 are speaking on August 29.

Central Banks: Upcoming Meetings to Shape Monetary Policy

• The Central Bank of Hungary (MNB) meets on August 27.