Ostwald, Marc
Attachments
09:08 (4 minutes ago)
to Marc
** Please note that there will be no updates Monday through Thursday next week due to holidays **
- Powell Jackson Hole speech likely to trump run of data that includes
US Durable Goods; Japan CPI and German GDP detaisl to be digested
- Powell: unlikely to grandstand on economic theory, but may well offer
insights on Fed Balance sheet, financial conditions and perhaps EM
considerations for Fed policy
- US Durable Goods: aircraft expected to weigh on headline, but core
orders see sustaining solid pace of growth, even if momentum starting
to fade
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** EVENTS PREVIEW **
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There is no doubt that Powell's Jackson Hole speech will render the rest of the day's scheduled data and events to be little more than 'roadkill', with the data schedule in any case relatively modest, with Japan's national CPI and the detailed breakdown of German Q2 GDP to be digested ahead of US Durable Goods and Polish Unemployment, as the UK winds down for the late summer Bank holiday on Monday. Next week's schedule is a little busier with German and Eurozone CPI, accompanying the Ifo survey (and various other EU and national surveys), while the US looks to Consumer Confidence, Goods Trade Balance, Personal Income/PCE, Pending Home Sales and the first revision to Q2 GDP. Japan has its usual end of month rush of Tokyo CPI, Retail Sales, Industrial Production and UNemployment, while Canada has Q2 GDP, the UK monetary adn credit aggregates, and Australia Q2 Private CapEx. It will also be another bumper week for US Treasury supply ($104 Bln total 2, 5 & 7-yr 104, plus teh sual weekly 1, 3 & 6-mth Bills), and there will be a smattering of central bank speakers, as another month draws to a close, and interest rate futures 'roll over' in the UK/US.
** U.S.A. - Powell Jackson Hole speech **
- As previously noted, Powell has clearly marked his stall out as being a pragmatist, and is therefore likely to eschew the theoretical (academic) grandstanding of Bernanke and Yellen, and as is usual for this conference will not go into any detail on the immediate outlook for Fed policy, outside of referencing Wednesday's minutes. This year's theme 'Changing Market Structure and Implications for Monetary Policy' certainly lends itself to a discussion on bank (and other financial market particpants) regulation and captial requirement, and how that impacts overall market liquidity, and the potential implications for monetary policy in both conventional and unconventional terms. In so far as the FOMC minutes noted that the FOMC would be discussing the future of its balance sheet reduction programme, which is currently set to peak at a $50 Bln per month pace in Q4, in the autumn, he will doubtless avoid any specific signals on what happens thereafter, though he will likely outline key considerations for that debate. There may also be some discussion on whether the Fed may look to further reduced IOER (interest on excess reserves), and above all plenty of interest in roughly what sort of sized balance it needs to maintain as a bare minimum to ensure the smooth running of Treasury and various associated repo and derivative markets. While the Fed has long held to an 'America first' perspective in terms of formulating US monetary policy, it will be interesting to see whether there is any mention of the risks posed by the large increase in EM borrowing in USD over the past 10 years, and indeed the influence on the shape of the US yield of EM central Banks' huge mountain of FX reserves that have been accumulated since the 1997/98 Thai/Russia meltdown. The line-up of speakers, with the perhaps notable absence of Draghi and Kuroda can be found here:
https://www.kansascityfed.org/publications/research/escp/symposiums/escp-2018 .
** U.S.A. - July Durable Goods Orders **
- After a largely aircraft paced gain (Paris Air show) of 0.8% m/m in June, with core measures posting a gains of 0.2% and 0.7%, July Orders are forecast to drop 1.0% m/m due to aircraft, though the ex-Transport and Non-defence Capital Goods ex Aircraft measures are expected to post a solid 0.5% gain. While some of the regional surveys saw quite sharp drops in Orders sub-indices, the ISM Manufacturing New Orders dipped to a still very strong 60.2 from 63.5, suggesting a still very robust pace of demand, even if trade tensions and the potential for related supply chain disruptions may well act as a drag in H2 2018. As ever the Shipments component will be the material element in terms of next week's revised Q2 GDP, as all as offering an idea on the degree to which the strength of Business Investment in Equipment in H1 2018 is or is not being sustained in Q3.
from Marc Ostwald