Week Ahead in FX (August 21 – 25): Global PMIs and Jackson Hole-Related Volatility

Forex News FX

A new trading week means we get another chance to price in new economic data!

This week, PMI reports will give us sneak peeks of manufacturing and services trends in the major economies.

Before all that, ICYMI, I’ve written a quick recap of the market themes that pushed currency pairs around last week. Check it!

And now for the closely-watched economic indicators on the calendar this week:

Global PMIs

Will August’s manufacturing and services PMI reports support a higher-for-longer monetary policy environment for the major economies?

Australia’s (Aug 22, 11:00 pm GMT) manufacturing PMI is expected to return to expansion territory, up from 49.6 to 50.1 while the services PMI may have a chance to go back above 50.0 after a 47.9 read in July. Meanwhile, Japan’s (Aug 23, 12:30 am GMT) manufacturing PMI is seen maintaining its 49.6 figure in August.

The Eurozone’s PMIs scheduled on August 23 could give clues on whether the region could sustain the better-than-expected growth figures that we saw in Q2.

France’s (7:15 am GMT) manufacturing PMI could inch up from 45.1 to 45.2 while its services PMI could improve from 47.1 to 47.5. Germany’s (7:30 am GMT) could see weaker activity markers with the manufacturing PMI dropping further from 38.8 to 38.6 while the services PMI could drop from 52.3 to 51.5.

Expectations for the Eurozone (8:00 am GMT) are mixed, with the manufacturing PMI probably improving from 42.7 to 42.8 while the services PMI could dip from 50.9 to 50.6.

The U.K.’s (Aug 23, 8:30 am GMT) PMIs will get attention as the Bank of England (BOE) will probably look at the reports for evidence of stagnation in the services sector. For now, the manufacturing PMI is expected to dip from 45.3 to 45.1 while the services PMI is seen weakening from 51.5 to 50.9.

Last but not the least is the U.S. (Aug 23, 1:45 pm GMT), which could see an improving services sector. Uncle Sam’s manufacturing PMI could slip from 49.0 to 48.9 while the services PMI may inch higher from 52.3 to 52.4.

New Zealand’s quarterly retail sales

We know from the RBNZ’s statement last week that central bank members believe that interest rates “need to remain at a restrictive level” in the foreseeable future. In an interview, Governor Orr added that they’ll need to at least see a “mild inflation” before they consider cutting rates.

This week’s retail sales data may give us clues on how close New Zealand’s consumer activity is to a “mild inflation.” On August 22 at 10:45 pm GMT, analysts see headline retail activity dipping by 0.2% in Q2 after a 1.4% decline in Q1 while core retail sales could see a 0.1% decrease after a 1.1% drop in Q1.

Jackson Hole speeches

Later in the week, the annual Jackson Hole symposium will kick off with speeches from major central bankers.

Fed Governor Powell’s speech on August 25 at 2:05 pm GMT will probably get the most attention as the markets seek clues on the Fed’s next policy steps.

Word around is that Powell will hint at a pause in the September meeting but also keep rate hikes on the table for the November and December meetings.

ECB President Lagarde will also five a speech at 7:00 pm GMT and could give clues on the central bank’s hawkishness for the rest of the year.

Meanwhile, speeches by FOMC members Goolsbee, Bowman, and Harker throughout the week could set the tone for Powell’s remarks on Friday.

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