Fed Hawks in Jackson Hole

Noam Stiekema

Fed Hawks in Jackson Hole – USD/JPY shot past 102 on Yellen’s and Fischer’s hawkish comments.

new york

By Wayne Ko, Head of Research & Education at Fullerton Markets

“Indeed, in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months.” said Fed Chair Yellen in her speech during Jackson Hole Symposium last Friday.  Vice Chair Fischer further supported her comments, saying a rate hike in September and 2 rate hikes this year are possible.  The dollar rallied to a 2-week high against most of the major currencies.  The comments have pushed the odds of a rate hike in December to more than 60%.  If the upcoming Non-farm Payroll adds around 190K or more jobs, it could well push the odds even higher, together with the dollar.

The delay in Fed rate hike is posing a challenge to other central banks trying to boost their inflation or fight disinflation.  The most recent examples are RBA, RBNZ and BOJ.  All 3 central banks wanted to weaken their currencies by slashing interest rates to historical low or announcing more stimuli.  Their currencies remained relatively strong due to the weakness in US dollar.  Fed hawks came in the right time to support the dollar.  We maintain our bias of an unlikely rate hike in September, ahead of the US presidential election in November.  The likelihood of a rate hike would be in December.

The other factor contributing to the low inflation is the relatively low oil prices.  WTI has risen recently on speculation of possible production freeze deal … again.  But, speculations can do just this much.  WTI now hovers between $47 and $48 per barrel, awaiting more concrete progress in the proposal.  If there is no progress in the next one month, prices may head south again.

Without a doubt, the Non-farm Payroll will be the most watched data this week.  Besides that, UK Manufacturing PMI and Construction PMI could give further clues to the impact after Brexit referendum.  The previous figures of 48.2, 45.9 and 47.4 have shown contractions in all 3 sectors, manufacturing, construction and services respectively.  Judging from the other relatively positive UK data, we do expect the upcoming PMIs to show a lesser margin of contraction as compared to the previous figures.

Our Picks

FM WMR 20160829-EURJPYH4

EUR/JPY – Slightly bullish.  Price has broken the resistance around 113.90.  The bullish momentum may continue.  Possible to buy at dips.

FM WMR 20160829-XAUUSDDaily

XAU/USD (Gold) – Slightly bearish.  Gold is dropping as dollar strengthens.  Price is near support of 1313.  Favourable Non-farm Payroll may be the catalyst for it to break the support.

FM WMR 20160829-OILUSDH4

OIL/USD (WTI Oil) – Slightly bearish.  WTI is consolidating between $47 and $48.  Near term dollar strengthen may push it towards $46.80.

Top News This Week (GMT+8 time zone)

Australia: Retail Sales m/m.  Thursday 1st September, 9.30am. We expect figures to come in at 0.4% (previous figure was 0.1%).

UK: Manufacturing PMI.  Thursday 1st September, 4.30pm. We expect figures to come in at 49.3 (previous figure was 48.2).

US: Non-farm Payroll.  Friday 2nd September, 8.30pm. We expect figures to come in at 192K (previous figure was 255K).

  • Read this next

    Fintech

    Volt secures EMI license, expands payment solutions in UK

    Volt has successfully obtained an Electronic Money Institution (EMI) license from the UK’s Financial Conduct Authority (FCA).

    Retail FX

    ASIC bankrupts finfluencer Tyson Scholz over stock tips

    The Australian Securities and Investments Commission (ASIC) has effectively bankrupted Tyson Robert Scholz, the figure behind “Black Wolf Pit.” The action marks a significant crackdown on so-called ‘finfluencers’ and individuals providing unlicensed financial services.

    Digital Assets

    Green Bitcoin Presale Raises $1M as Bitcoin Approaches its ATH

    The eco-friendly crypto project Green Bitcoin has seen its limited-time presale phase cross $1 million in funding. With an innovative gamified staking model and energy-efficient foundation, Green Bitcoin offers token holders a way to stake their tokens and generate yield.

    Web3

    Introducing QuickNode Streams: Elevating Blockchain Data Management

    Discover QuickNode’s Latest Innovation: Streamlining Blockchain Data Streaming for Enhanced Efficiency and Accessibility. Explore the Future of Blockchain Technology with Streams.

    Industry News

    John Oliver rips into MetaTrader over role in ‘Pig Butchering’ scams

    “If your friend told you to download an app, and you saw it in the app store with good reviews, you might assume everything on it was legitimate. In before, you saw MetaTrader’s logo which looks like three men in suits jerking each other off under a table – an appropriate metaphor for cryptocurrency if I have ever seen one,” Oliver quipped.

    Digital Assets

    Coinbase supports Nethermind and Erigon to ease Geth dependency

    Coinbase plans to support additional execution clients as America’s largest crypto platform aims to improve the Ethereum blockchain’s resilience and mitigate the risks associated with the network’s heavy reliance on a single client.

    Opinion

    How AI Transforms Trading: Current Trends and Perspectives

    In 2023, we observed a boom of news about Artificial Intelligence (AI) in every field, whether finance, tech or medicine. In 2024 and later, AI will take an even more significant place.

    Industry News, Uncategorized

    FCA wants to tackle lack of competition in wholesale data market

    “Complex licensing practices by MDVs and trade data providers who deliver their data through MDVs increase costs for data users. Many Market Data Vendor (MDV) users have to hold licences both from the data generator (such as a trading venue) and from the MDV through which they access data. We have seen an increasing proliferation of licences for similar data types and different use cases. Complexity also drives additional costs for data users, such as operating a compliance team.”

    Digital Assets

    SEC objects to Terraform’s $166 million legal retainer

    The U.S. Securities and Exchange Commission (SEC) has lodged objections against Terraform Labs for a $166 million retainer payment to its legal representatives ahead of its trial.

    <