tock markets in North America and Europe are trading higher again this morning catching a tailwind form a late day rally in Chinese markets which reportedly came on the back of government buying.
The PBOC also ploughed more short term money into the system for the second time this week and apparently intervened in swap markets to help increase liquidity. There also have been reports that China may be done devaluing CNY for now and could hold it in a narrow range in a big to avoid kicking off a currency war that could destabilize things even further.
With the China situation apparently stabilizing for now, commodities are bouncing back strongly this morning, with crude oil, gasoline and copper, all of which have been depressed lately, posting particularly strong gains. This action has propelled strong gains for oil sensitive currencies including CAD, NOK and RUB with other resource currencies like AUD and NZD climbing at a slower pace.
Focus now turns back to the US and speculation on whether the Fed may start to raise interest rates or not. The Fed’s Jackson Hole Conference starts today, and Kansas City Fed President George, host of the event has already been out speaking this morning. She maintained her hawkish stance indicating she believes it’s time for the Fed to start normalizing interest rates. Although she’s not a voter this year, these comments could temper some of yesterday’s dovishness as they indicate that the hawkish faction in the FOMC hasn’t gone away and even if we don’t get a hike in September, we will probably see hawkish dissenters.
The focus of the conference is on inflation and today one of the Fed’s favourite inflation measures is coming out, the quarterly core PCE figure. While headline figures have been low, core PCE has been showing inflation running pretty close to the Fed’s 2.0% target, quarterly just below and monthly just above. The Q2 GDP revision may also attract attention today with a big upward shift expected that could show a stronger US economy in the first half than had been thought at the time. A surprise in either figure could spark trading action in USD and US stocks.
The main event of the Jackson Hole conference is Fed Vice-Chair Fischer’s speech on Saturday, so speculation on what the Fed might do next month could keep markets hopping through the weekend and on into next week’s big employment and PMI reports.
TD Bank $1.20 vs street $1.18
CIBC $2.45 vs street $2.31
Significant announcements released overnight include:
UK Nationwide house prices 3.2% vs street 3.1%
Spain Q2 GDP update 3.1% as expected
Australia Q2 private capex (4.0%) vs street (2.5%)
Upcoming significant announcements include:
8:30 am EDT US Q2 GDP update street 3.2% vs previous 2.3%
8:30 am EDT US Q2 personal consumption street 3.1%
8:30 am EDT US Q2 core PCE inflation street 1.8%
8:30 am EDT US jobless claims street 275K
10:00 am EDT US pending home sales street 8.3%
10:30 am EDT US natural gas street 61 BCF
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