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Jackson Hole Symposium arrives once again.

By Hamish Muress

This upcoming week and last week couldn’t be more contrasting for UK data releases. Whilst last week saw the release of a raft of data in the form of retail sales, inflation and wage growth, this week there is no data whatsoever. Indeed that is it in terms of major UK data reports, with nothing else set to excite the market until September. This is important because last week the data actually was quite positive from the UK, with retail sales rising (thank you Harry Kane) and unemployment falling to 43 year lows. However, the reaction from the pound was very muted suggesting that all eyes are elsewhere, most notably the risk of a ‘no deal’ Brexit.

Brexit headlines could in fact return this week as UK-EU negotiations start once again whilst Parliament returns from its summer recess the week after the bank holiday. In the meantime, expect the pound to remain under pressure unless there is pullback in the USD recovery.

Last week was another great week for the USD especially against the Euro as EUR/USD hit 1.13 on Wednesday, before the Euro regained some losses. However, the rally in the USD has slowed slightly ahead of a couple of important headline events this week. The first of these is the renewed trade talks between the US and China on Tuesday and Wednesday. Any progress or news coming out of these talks could see a reversal in the USD’s fortunes (the USD has benefited greatly due to Trump’s trade wars and tariffs, much to his angst). However, the Federal Reserve won’t be escaping the limelight with the release of the latest FOMC minutes as well as Jerome Powell speaking at the Jackson Hole Symposium (Powell is set to talk about the role of monetary policy in a changing economy). The market will be looking for further signals in the Fed minutes towards two more rate hikes this year, currently September and December but these are largely expected. More crucially therefore will be further information as to how much further the balance sheet will be shrunk.

Well done Greece! After eight years, a lot of political maneuvering and €289bn later, Greece has now exited its bailout programme meaning it can now borrow funds once again on the capital market. For the Euro, which hit one year lows of EUR/USD 1.13 last week, the risk still remains in Turkey. Indeed one facet for the Euros slide to 1.13 was fears that Italy and Spain could be overexposed to Turkish debt. Currently, the market isn’t sold on the policies of President Erdogan and finance minster Albayrak with credit agencies S&P and Moody’s both cutting Turkey debt rating deeper into junk status. The highlight for the Euro this week will be EZ PMIs which could be the first PMIs that show a slowdown in growth due to trade tensions.

The Australian dollar turned a small corner last week as it bounced off its lows against its USD counterpart. The Aussie has benefited from the slowdown in flows towards the USD safe haven but it is not out of the woods just yet making this week’s US-China trade talks incredibly important for the currency. It’s not just trade talks that will drive the Australian dollar though this week, keep an eye out for the RBA minutes tomorrow which could reaffirm that a hike is still more likely than a cut in terms of the next interest rate decision.

Canadian annualised inflation jumped to 3% last week, which was its highest level since 2008. This has seen a rethink of the chances of a rate hike by the end of the year with the market now pricing a 82% chance of a hike.

Any planned moves to the wonderful islands of New Zealand will have to be put on hold for the foreseeable future as the New Zealand government banned the sale of houses to foreigners, a headline which stole headlines. The Kiwi continues to remain under pressure especially if retails sales and trade figures fail to add any support.