Weekly Outlook, 29 Aug. - 2 Sep.

NFP after Jackson Hole!

After all speeches, this week's market reaction to the Jackson Hole symposium would be important. However, Friday's sharp decline does not have a good signal. With NFP ahead at the end of the week and many other data from other developed economies, we can better understand future central banks policies, which are expected to be more hawkish so far. Let us review the most important events and data with me, Ahura, and IFC Markets.

US Consumer Confidence – Monday

US CB Consumer Confidence is expected to fall to a 2-year low of 92.0 from 95.7 in July to increase the chance of recession. Lower consumer confidence means fewer expenses, which is in line with supply chain disruptions, inflation, and weaker PMI numbers can push down stock prices.

China PMIs – Wednesday

China is dealing with another wave of Covid. In the real estate sector, high levels of debt and increasing defaults are also restraining activities that are already down, especially in recent weeks. In addition, the risk of drought has become showier in recent days with the drying up of rivers, which can increase the concerns and is likely to be reflected in PMI surveys. The consensus expectation is to see the official services PMI decline for the second month in a row, to 52.2 in August. Manufacturing PMI is expected to increase slightly to 49.3 but remains below the expansion level of 50. With these expected data, the Oil price bullish trend should slow down this week.

Eurozone inflation – Wednesday

The latest published data for July showed that Eurozone CPI rose 8.9% annually, the most significant increase on record. That said, inflation pressures are becoming more evident. While international Oil and gas prices were slightly lower in August, in Europe, gas prices were still sharply increasing to decrease the chance of calming inflation. With this condition, the consensus estimates for the headline CPI inflation are slightly higher to a record high of 9.0% annually. Meanwhile, core CPI inflation is expected to remain unchanged at 4.0%. These data can increase the chance of another 50 bps rate hike by the ECB, which can pause the EURUSD downtrend.

US ISM Manufacturing Index – Thursday

ISM manufacturing index includes prices paid, new orders, production, and employment components. The up and down of each of these details have a different signal. In the current situation decline in the ISM's prices paid component can be even positive if new orders, production, and employment components show some resilience. Slight weakness in the ISM Manufacturing Index can be positive, as it means that the economy is slowing slightly to decrease inflation. However, a sharp decrease can be fatal because it can increase the chance of recession to lift the USD safe-haven demands.

US Employment Numbers – Friday

The most important event of this week will be Nonfarm payrolls on Friday. Despite the much better than overall expectations with 528K newly created jobs, other indicators show that the US economy is slowing down. With more tightening monetary policies, it is likely to see weakness in the labor market as well in the following months. For August, overall estimates are to see 285K newly created jobs with unemployment remaining unchanged at 3.5%. In addition, average hourly earnings are assumed to rise 0.4% after a 0.5% July gain, while the annual wage gain should increase slightly from 5.2% to 5.3%.