Daily Market Commentary 25th August 2022

Markets tread water, ahead of the important Jackson Hole Economic Symposium, where Central Bankers and economists gather to discuss monetary policy. Ahead of the keynote address, Federal Reserve Chairman Powell, will be the release of the Fed’s key inflation indicator, the PCE. It was 6.8% for June, but the CPI numbers moderated, so expectations are for a softer number. If the PCE number was to increase, then we could see an even more hawkish speech, from the head of the Fed. The key driver of US inflation has been fuel prices, but the US Biden Administration has been pouring oil from their ‘strategic oil reserve’ to push prices lower. US Oil reserves are now dangerously low, lowest since 1985, following the previous administration’s massive stockpiling when oil dipped to below zero. The strategic reserve is a national security issue, as these need to be strong in case of mobilisation, and in these troubled times red flags should be waving.

US Housing remains a key leading economic sector and the latest Pending Home Sales number (minus 19.9%), was terrible. This follow a string of weak numbers, New Homes Sales were down 12.6%, which all indicates the recession may be deepening. US Weekly Mortgage Application also fell 1.2%, while the Richmond Fed Manufacturing Index, plunged to minus 8! US Durable Goods Orders crashed to zero, showing consumer demand for larger ticket items, is extremely worrying. The EUR traded round 0.9950, mired in their own inflation/energy crises, while the GBP fell back below 1.1800.

Commodity prices were firm, but the stronger reserve pushed the NZD back below 0.6200, while the AUD is testing 0.6900, to the downside. All eyes remain firmly on Jackson Hole, Wyoming and the US PCE data.