Wednesday 18 September 2019

Ulster Bank Markets Daily Top Three

Janet Yellen
Janet Yellen

John Barry

GBPUSD tests 3 week high as US data remains mixed

GBPUSD touched a high of 1.3273 yesterday, as data released from the US was somewhat mixed.  US durable goods orders beat expectations, recording the largest increase since January, while US jobless claims fell for the third consecutive week, suggesting the labour market is continuing to gain momentum.  Jobless claims have been below 300,000 for 77 consecutive weeks now – a level which is considered an indicator of a healthy labour market.  In contrast the US Services PMI figures came in worse than expected at 50.9 for August, indicating that while the US economy continues to expand, it does so at a slower pace.  This was the lowest reading since February and considerably below expectations, with falling demand and subdued business optimism cited as the main pressures.  Some market analysts believe that uncertainty due to the upcoming presidential election is affecting business optimism which may impact US growth this year, with 2nd estimates of Q2 GDP figures for both the US and UK due later today. 

European Business Confidence falls unexpectedly

The German IFO business confidence index fell by more than expected in August to the lowest levels since 2014, with some analysts believing that the reality of Brexit is beginning to weigh on sentiment, particularly across manufacturing, wholesale and retail industries.  French manufacturing and business confidence numbers were also lower than expected.  The EUR shrugged off the weak figures to recover from the 2 week low seen against the pound on Wednesday, touching a high of 0.8566 while breaking through 1.13 against the USD early this morning. 

Markets look for policy hints at highly anticipated Jackson Hole Summit

The main event of the week takes place at 3pm today when Janet Yellen, Head of the Federal Reserve, will deliver her speech at the Jackson Hole Economic Symposium.  The Fed have confirmed that Yellens speech is titled “The Federal Reserves Monetary Policy Toolkit” and market analysts will look for any hints about the timing of the next change in policy by the US central bank, following several hawkish comments from her fellow board members in recent weeks.  Esther George, President of the Kansas City Fed, was quoted yesterday as saying the “time is right” for a near-term rate hike, having voted for a 25bp increase in July, while the Dallas Fed President, Robert Kaplan, said “the case is strengthening” for a hike in US rates “in the not too distant future” due to gradual progress on employment and inflation.  US Trade balance figures (July) and the University of Michigan Survey (August) are also due this afternoon, however Yellens speech is likely to take centre stage to close out the week. 

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