Weekly Outlook: August 27 - 31
With another fairly light week on the economic calendar investors will continue to monitor developments on the U.S. political front after a bruising week for President Donald Trump, following the criminal conviction of two associates.
Tuesday’s U.S. trade data will be in focus after US-China trade talks ended with little progress and both countries slapped fresh reciprocal tariffs on imports.
Investors will also be eyeing a revision to second quarter U.S. GDP data due out on Wednesday. Growth is expected to be revised down to 4% from the initial estimate of 4.1%, but that would still represent the fastest pace of growth in four years.
Canadian data on second quarter growth on Thursday is expected to show that the economy gathered momentum, which would bolster expectations for a September rate hike by the country’s central bank.
The dollar fell on Friday after Federal Reserve Chairman Jerome Powell said in a closely watched speech at the central bank’s annual gathering at Jackson Hole, Wyo. that he expects to see further interest rate increases, but suggested that the Fed funds rate was getting closer to neutral.
Once interest rates reach a neutral equilibrium, where they neither stimulate nor suppress the economy the Fed can cease hiking rates.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was down 0.49% at 95.08 late Friday. The index ended the week down 0.96%, its second consecutive weekly decline.
The dollar had been boosted by safe haven demand amid escalating trade tensions between the U.S. and China and after Wednesday’s Fed minutes, which underlined expectations for a September rate hike.
Officials from the U.S. and China ended two days of trade talks on Thursday without making any major progress. The talks ended as a new round of U.S. tariffs kicked in on $16 billion worth of imports from China, followed immediately by reciprocal tariffs from Beijing.
The dollar was little changed against the yen late Friday, with USD/JPY at 111.26.
The euro gained ground against the softer dollar, with EUR/USD advancing 0.72% to 1.1622.
The pound fell to its lowest level against the euro in almost a year Friday as concerns over the prospects of a no-deal Brexit continued to weigh. EUR/GBP was up 0.43% to 0.9045 in late trade.
Meanwhile, the Australian dollar rebounded, with AUD/USD up 1.08% to 0.7325 as concerns over domestic political uncertainty eased after the ruling Liberal party elected a new leader.
Ahead of the coming week, Investing.com has compiled a list of significant events likely to affect the markets.
Monday, August 27
Financial markets in the UK will be closed for a holiday.
The Ifo Institute is to report on German business climate.
Tuesday, August 28
The U.S. is to release reports on the trade balance and consumer confidence.
Wednesday, August 29
The U.S. is to publish revised second quarter GDP data as well as figures on pending home sales.
Thursday, August 30
New Zealand is to produce data on business confidence.
Australia is to release reports on capital spending and building approvals.
In the euro zone, Germany is to publish preliminary inflation figures.
Canada is to release what will be closely watched figures on second quarter GDP growth.
The U.S. is to produce data on personal spending along with the core PCE price index, which is the Fed’s preferred inflation measure.
Friday, August 31
China is to publish reports on manufacturing and service sector activity.
The euro zone is to release preliminary inflation data.
The U.S. is to round up the week with a report on business activity in the Chicago area.