Your weekly fundamental view (August 22-26)

August 22, 2016 14:00


Need to know

The main focus of this week is the annual Jackson Hole event, hosted by the Federal Reserve (FED) in Wyoming in late August. Other important highlights include several U.S. data releases on GDP and unemployment claims, a speech from the BOJ Governor and European figures on consumer confidence plus business climate.

Coming up

The Bank of Japan (BOJ) governor speaks Tuesday 23 August. BOJ governor H. Kuroda is speaking at a Fintech Forum. During the weekend the governor indicated that the BOJ does not rule out further rate cuts into negative territory. In January, rates were set at minus 0.1 percent on some bank deposits at the central bank. The BOJ will also decide how to adjust its asset-purchase plan in September, after its monetary policy assessment. Why should traders care? The asset purchases plus low and negative interest rates - are part of BOJ's strategy to achieve a two percent inflation target. The measures have failed to spur inflation anywhere near the target.

The Jackson Hole event is held 25 to 26 August. The annual symposium will offer a speech from FED chair Janet Yellen on Friday. The market is anticipating a rise, but the FED has been tempering expectations regarding timing and quantity of its rate hikes. The FED's minutes from Wednesday 17 August, showed only small minorities are considering a rate hike whereas the vast majority prefers to wait. Why should traders care? FED chairs have occasionally used the annual symposium to make key policy announcements. Investors and traders will attempt to pick up clues about a potential interest rate hike in 2016.

US unemployment claims released Thursday 25 August. These claims are the earliest national economic data that shows how many individuals filed for insurance for the first time during the past week. Previous data shows 262k vs. 265k forecast for this week. Why should traders care? If the actual numbers are
less or more than predicted, it will influence the US Dollar.

German Ifo Business Climate, Thursday 25 August. The survey is conducted with 7,000 businesses and asks for their sentiment regarding current business conditions and their expectations for the next six months. The chart below, summarises Ifo scores over recent years. Why should traders care? July showed a strong score of 108.3, but will Ifo show the same strength after the Brexit? The market is anticipating a score of 108.5 and is expecting a bounce for August.

ger 22 aug.png