- USD rises.
Sentiment is divided as the trading week begins. The US stock market’s four-week winning rise came to an end last week, and this week began with the disappointing news that drought in China’s Sichuan area will lead to’severe’ power outages.
In order to increase demand for credit, the People’s Bank of China recently slashed interest rates on loans to businesses and individuals. Shanghai’s stock market saw a modest uptick, but the rest of Asia and the main US futures all fell.
The week will begin with the S&P 500 down 1.20% from the previous week and the Nasdaq down more than 2.5%, both of which will put pressure on bulls.
The Federal Reserve (Fed) meeting in Jackson Hole will be the center of attention. Due to widespread uncertainty about the direction of either the market or the Federal Reserve, this year’s Jackson Hole may have a more pronounced effect on investor sentiment than normal.
The assumption, rather than the actuality or an announcement, that the Federal Reserve may ease up on its policies and begin decreasing interest rates if the US economy enters recession was the primary catalyst for the stock market advance in July.
Despite numerous warning signals that a recession may soon be upon us, the Federal Reserve has shown no indication that it plans to begin decreasing interest rates again.
Members of the Federal Reserve instead maintained that monetary policy would tighten until there were indicators of sustained easing toward the 2% policy target.
Accordingly, the present equities advance could drive the S&P500 and Nasdaq to their respective 100-DMA levels if anything unpleasantly hawkish emerges from this week’s Jackson Hole meeting.
The latest PMI readings, US durable goods orders, GDP, and PCE, another metric of inflation highly studied by the Fed, will all be known before the Jackson Hole symposium.
Euro decline’s even as USD rises
Traders in the Eurozone will be watching today’s flash PMI results closely to gauge how the recent surge in energy costs has affected business.
As expected, the German PPI data released on Friday showed a shocking increase of over 5% in factory-gate prices in just the month of July, with roughly 15% of the increase attributable to a spike in energy costs.
The German PPI increased by 37% compared to the same period last year, when economists had predicted a modest slowing.
The losses in the EUR/USD continued. As the European Central Bank (ECB) is reluctant to move, the hawkish expectations don’t do much to enhance mood in the euro, even if a higher-than-expected inflation print should rather boost the prospect of more aggressive action from the ECB and resuscitate the bulls.
The euro might go below $1.20 versus the US currency if we see negative surprises throughout the PMI readings.
The dollar bulls are out in full force again, as we speak. A stronger dollar is a problem for everyone, but it’s especially problematic for U.S. businesses since the value of their overseas earnings decreases when translated back to dollars.
Gold is under constant downward pressure as USD rises. As Bitcoin battles to maintain its value over $20,000, the price of an ounce of gold has dropped to $1743 this morning.
Bitcoin might drop below the $20,000 level this week if US stocks, especially tech sectors, start to lose ground.
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