Mohicans markets：Follow Powell's Speech at the Annual Meeting of Global Central Banks Iran May Return to Global Oil Supply Market

At 20:30 tonight, the United States will announce the annual rate of the PCE price index for July, which is currently expected to be 4.7%, down 0.1% from the former.

The Jackson Hole Global Central Bank Annual Conference will be held today. At 22 o'clock in the evening, Fed Chairman Powell will deliver a speech. Investors need to pay attention to whether Powell's speech will mention the Fed's future policy plan. At present, some analysts expect Powell to announce a policy change at this meeting.

Global Views - List of Major Markets

Spot gold rose to a high of $1,765.36 before the U.S. market, was blocked and fell back to $1,760, and finally closed up 0.45% at $1,758.94 per ounce on Thursday August 25. Spot silver closed up 0.72% at $19.25 an ounce.

The US dollar index fell first and then rose. It fell below the 108 mark during the session, and then recovered most of the lost ground, and finally closed down 0.18% at 108.41. The 10-year U.S. Treasury yield fell sharply, but remained at a high level, closing at 3.031%. In terms of crude oil, the two crude oils fell sharply during the U.S. session. WTI crude oil rose to a high of $95.72 and then dived sharply, and once fell more than 3%, and finally closed down 2.43% at $93.00 per barrel. Brent crude oil fell below the $100 mark and finally closed down 1.88% at $99.78 a barrel.

The Dow closed up 0.98%, the Nasdaq closed up 1.67%, the S&P 500 closed up 1.41%, the Nasdaq China Golden Dragon Index rose more than 6%, and the U.S. stock market closed sharply higher on Thursday. Investors focused on the Federal Reserve's Jackson Hole meeting for clues on the Fed's policy outlook, boosted by gains in Nvidia and other tech-related stocks. Investors will dissect Fed Chairman Jerome Powell's speech on Friday for signs of how aggressive the central bank may be in raising interest rates as it battles multi-decade-high inflation.

Most European stocks closed up, with Germany's DAX index closing up 0.39% at 13,271.96 points; the UK's FTSE 100 index closing up 0.11% at 7,479.74 points. The European Stoxx 50 index closing up 0.19% at 3,674.54 points.

Precious Metals

Spot gold fluctuated slightly and was currently trading around $1,754 On Friday August 26, Beijing time. Although the U.S. dollar pulled back slightly on Thursday, helping gold prices rise for three consecutive trading days. But gold prices were blocked on Thursday and still fell below the daily Bollinger Band mid-track. In the speech at the annual meeting, the market is expected to be hawkish, and investors need to beware of the risk that the price of gold will return to the downward trend.

In addition, investors also need to pay attention to the US July PCE data, which is the inflat   ion data the Fed is most concerned about. At present, the market expects that inflation growth will slow down, which may ease the pressure on the Fed to raise interest rates aggressively. Before the data is released, it is slightly inclined to support the price of gold. The U.S. economy shrank less than initially estimated in the second quarter, with consumer spending offsetting some of the drag from a sharp slowdown in inventory accumulation, easing fears of an imminent recession and favoring a bearish outlook for gold. It should be reminded that geopolitical news other than the situation in Russia and Ukraine will also affect the market situation, and investors need to pay attention.

Fundamentals are mostly bullish

[Fed officials' words softened slightly]

[Dollar edged lower on Thursday, U.S. Treasury yields fell]

[Bank of America: Inflation and the dollar may have peaked]

[ECB meeting minutes show policymakers are increasingly worried about high inflation becoming entrenched]

Fundamentals are mainly bearish

[U.S. GDP contracted less than initially estimated in the second quarter, and the data showed no signs of recession]

[The U.S. labor market is quite resilient]

[The probability of the Fed raising interest rates by 75 basis points in September increases]

[U.S. stocks ended sharply higher, driven by gains in technology-related stocks such as Nvidia and Amazon]

[The UK retail sales gap rose to plus 37 in August, the highest in nine months]

[Zelensky said that the Russian-controlled Ukrainian nuclear power plant restored power, and the radiation disaster was averted]

On the whole, the amplitude of the gold price may expand on this trading day. It is not ruled out that there will be a back and forth between long and short positions in the intraday trading. Combined with the technical point of view, the overall gold price tends to fluctuate slightly downward.

Crude Oil

In early trading on Friday August 26, Beijing time, U.S. oil traded around $93 a barrel.

Oil prices retreated nearly 2.5 percent on Thursday, as investors braced for a possible return of sanctioned Iranian oil exports to global markets, and after Federal Reserve Chairman Jerome Powell spoke at the annual meeting of central banks around the world on Friday.Concerns that rising U.S. interest rates will dent fuel demand, and weak gasoline demand also weighed on oil prices.

Negative factors affecting oil prices

[Oil prices are affected by Iran or resume oil exports]

[Powell may hint at further tightening policy]

[US media say Russian fuel is still entering the US]

[One million people have died of new coronary pneumonia in the world this year]

[U.S. gasoline demand is weak]

Positive factors affecting oil prices

[U.S. GDP shrinks less than initially estimated in the second quarter]

[Lebanon will suspend the national public electricity supply due to lack of fuel]

[Technology stocks boosted U.S. stocks to close sharply higher]

On the whole, oil prices are mainly affected by the outcome of the Iran nuclear negotiation in the short term. Before the results are released, the market remains vigilant, and trading may remain volatile. In addition, Fed Chairman Powell's speech at the annual meeting of global central banks is a key factor in intraday trading, and evening trading may be volatile. If Powell is further hawkish, oil prices may return to the 90 mark.

Foreign Exchange

The dollar index edged up slightly in the early trading session on Friday, August 26, Beijing time, and is currently trading around 108.45. The dollar index slipped on Thursday, while the Euro held steady in oscillating trade as investors await Fed Chairman Jerome Powell's speech on Friday. The trend of Euro against the dollar this week has been driven mainly by a surge in natural gas prices. Since the European region is dependent on natural gas for its energy needs, the spike in natural gas prices correlated with a weaker euro. Goldman Sachs said the Eurozone is facing a recession and the European Central Bank may need to cut interest rates. This is certainly another bearish factor facing the Euro.

Intraday focus: Jackson Hole annual global central bank meeting held for three days; Fed Chair Powell spoke at Jackson Hole annual global central bank meeting and may give hints on high borrowing costs in the U.S. and how to reduce high inflation.

Thursdays data showed that the dollar fell after initially rising after the U.S. economy shrank more modestly than initially estimated in the second quarter. It finally closed down 0.20% at 108.43.

The Euro briefly rallied above parity overnight, but Germanys Institute for Economic Research released a survey showing that German business confidence in August fell to its lowest since June 2020. The Euro weakened after a high degree of uncertainty due to the war in Ukraine and fears of economic slippage in the third quarter. The Euro closed up 0.09% against the dollar at 0.9973 on Thursday.

The trend of Euro against the dollar this week was largely driven by a spike in natural gas prices. The spike in natural gas prices correlated with a weaker Euro because the European region is dependent on natural gas for its energy needs. People's concerns about the global economy caused investors to flock to the dollar earlier in the week and the Euro to fall against the dollar.

The Australian dollar got a boost after media reports that Asia will take more measures to support its economy.

The dollar closed down 0.46% against the yen at 136.47 on Thursday.

The Australian dollar closed up 1.04% against the U.S. dollar at 0.6980 on Thursday.

Institutional Currency Viewpoint

1. Jefferies: Suggesting taking profits by shorting the pound and buying the Canadian dollar

①Jefferies Financial Group Inc. suggest shorting the British pound and buying commodity currencies such as the Canadian dollar. The banks strategists told clients that there is still time to profit from the economic turmoil triggered by surging energy prices. Brad Bechtel, the bank's head of global foreign exchange, said that although the pound is already weak, it could continue to fall. The pound has fallen 11% against the Canadian dollar this year and is now at C$1.5275, which is the lowest level since 2013.

② Bechtel said that the pound could fall to around C$1.45 in a worst-case scenario if the U.K. economy falls into a severe recession in the first quarter of 2023 and oil prices continue to rise. It makes perfect sense that holding exposure to energy-producing currencies such as the Canadian dollar versus the British pound.

2.Bank of America: Inflation and the dollar may have peaked

① John Shin and Athanasios Vamvakidis, strategists of Bank of America, said the U.S. inflation appears to have peaked due to falling oil and gasoline prices, and they expect the dollar to have peaked as well. They said inflation in the U.S. has started to fall, while it is still rising in most other G10 countries. The Fed is no longer the most hawkish central bank in the G10 because other central banks have also raised rates sharply.

② Although Shin and Vamvakidis say the dollar is overvalued, they do not expect it to weaken in the near term. They also expect inflation to stay sticky on the way down, keeping the Fed on its toes and maintaining a high interest rate policy for a longer period of time.

3. Societe Generale: limited room for the Euro to fall  

① Societe Generale said that the Euro should remain weak in the context of the European energy crisis, but it is unlikely to fall further sharply.

②The banks strategist Kit Juckes said: “The next few weeks are more likely to be gloomy rather than worse, which will make the Euro rise when the sell-off. But the Euro will not necessarily move significantly lower from current levelsunless something changes.”

4. Brown Brothers Harriman : USDJPY is expected to test the high at 139.40 on July 14th

①The analysts of Brown Brothers Harriman believe that USDJPY is expected to test the high at 139.40 on July 14th. Because the Bank of Japan remains dovish the Bank of Japan continues to maintain ultra-monetary easing policy, coupling with improved risk sentiment, the economists of Brown Brothers Harriman expect the dollar to move higher against the yen, eventually testing the high near 139.40 on July 14.

② The member of Bank of Japan Toyoaki Nakamura said current economic conditions do not allow the bank to change its easing bias. This view is in line with the market and supports our Bans forecast that the BOJ will maintain the current policy in the foreseeable future. The next BOJ meeting is on September 21-22, and no changes are expected at that time.

5. Mitsubishi UFJ: improved risk sentiment and rising UK government bond yields failed to support the pound

①The economists of Mitsubishi UFJ believe that the pound failed to gain support from the recent improvement in risk sentiment and rising UK government bond yields to strengthen, reflecting concerns about economic growth that still keep the pound under pressure.

②The Bank of Englands more restrictive benchmark interest rate will also exacerbate the economic downturn. Even if the BoE raises interest rates, the benchmark rate is expected to remain well below inflation and real interest rates remain negative and relatively unattractive.

6. Nordea Bank: The ECB is expected to raise interest rates by another 50 basis points in September, but a bigger hike is not ruled out

① The meeting minutes of the ECB in July show that many member states believe it is appropriate to raise interest rates by 50 basis points. As a result, Nordea economists expect the ECB to raise interest rates by another 50 basis points in September, but do not rule out the possibility of a larger hike. The ECB is now in a fully data-dependent mode, breaking free from the shackles of past forward guidance.

② Most management board members are focused on inflation risks, and sharp rate hikes will continue. Nordea economists say that benchmark interest rates remain at very low levels and the inflation situation is increasingly worrying, so it is not difficult to find support for rapid rate hikes, at least for the next few monetary policy meetings.

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