Forecasting the Coming Week: Recession Worries Outshine Fed’s Easing Measures

A challenging week led the US Dollar (USD) to fall to new yearly lows below 101.00, as investors anticipated additional and potentially deeper rate cuts from the Federal Reserve later in the year. This sentiment was reinforced by Fed officials and the dovish tone of Chief Powell’s Jackson Hole speech on Friday.

The US Dollar Index (DXY) fell to a 13-month low in the 100.70–100.65 range towards the end of the week, as expectations for interest rate cuts later in the year grew. The week starts with Durable Goods Orders on August 26, followed by the FHFA House Price Index and the Conference Board’s Consumer Confidence measure on August 27. On August 28, the MBA will release its weekly Mortgage Applications report, and the EIA will update on US crude oil inventories. August 29 will show the weekly Initial Jobless Claims release, a revised Q2 GDP Growth Rate, the advanced Goods Trade Balance, and Pending Home Sales. The week concludes with the PCE, Personal Income, Personal Spending, and the final Michigan Consumer Sentiment report.

EUR/USD increased for the fourth consecutive week, reaching levels not seen since summer 2023, approaching 1.1200. Germany’s IFO Business Climate will be released on August 26, with the final Q2 GDP Growth Rate in Germany expected on August 27. On August 28, Germany will also report the GfK Consumer Confidence. The EMU’s final Consumer Confidence and Germany’s final Inflation Rate are due on August 29. The week will conclude with Germany’s Retail Sales and labor market report on August 30, along with the eurozone’s flash Inflation and Unemployment rates.

The ongoing robust rally pushed GBP/USD above the 1.3200 level for the first time since July 2022, amid continued weakness in the US Dollar. Mortgage Approvals and Mortgage Lending data are scheduled for release on August 30.

USD/JPY resumed its decline, ending the week with significant losses around 144.60, reversing two weeks of gains due to a sharp sell-off in the US Dollar. On August 28, the final Coincident Index and Leading Economic Index will be released, followed by weekly Foreign Bond Investment data on August 29. August 30 will see the release of the Unemployment Rate, Retail Sales, flash Industrial Production, Consumer Confidence, and Housing Starts.

AUD/USD approached two-month highs just under the 0.6800 mark, continuing its recovery for the third consecutive week. On August 28, the RBA will release its Monthly CPI Indicator, with Housing Credit and Retail Sales data expected on August 30.

Looking Ahead: Insights and Perspectives on Economic Trends

• ECB’s Nagel is scheduled to speak on August 27.
• On August 28, the Fed’s Waller and the BoE’s Mann will deliver remarks.
• On August 29, the Fed’s Bostic, the SNB’s Jordan, and the ECB’s Nagel will all speak.

Central Banks: Upcoming Meetings Set to Influence Monetary Policies

• The Hungarian Central Bank (MNB) meets on August 27.