✅ Daily Market Analysis - MONDAY AUGUST 21, 2023
Key News:
Canada - New Housing Price Index (MoM) (Jul)
Friday witnessed a nuanced portrayal of the US stock market, portraying a landscape where glimpses of the US economy's strength are juxtaposed with apprehensions regarding the sustained upholding of elevated interest rates.
The Dow Jones Industrial Average managed a modest ascent of 30 points, marking a marginal uptick of 0.1%. In contrast, the S&P 500 exhibited a minor decline of 0.2%, while the NASDAQ Composite endured a more pronounced drop, experiencing a notable decrease of 0.5%.
NASDAQ indices daily chart
SPX indices daily chart
The technology sector bore the brunt of losses, with recent fragility compounding concerns that the upward trajectory of Treasury yields, particularly detrimental to growth-focused sectors like technology, might endure. This unease has been intensified by the anticipation that Federal Reserve Chair Jerome Powell will reassert the necessity for an extended phase of elevated interest rates at the imminent Jackson Hole symposium in the coming week.
In the midst of these unfolding events, Treasury yields experienced a momentary respite on Friday, a temporary pause that closely followed the 10-year Treasury yield's ascent to its highest point since 2007 during the preceding session.
Should the current trajectory persist, it raises the possibility of further gains in the 10-year Treasury yield, potentially leading to a breakthrough towards the significant 5% threshold.
On the currency front, the dollar capitalized on its momentum after achieving five consecutive weeks of advancement. Investors have now turned their attention to the Federal Reserve's Jackson Hole symposium, in search of insights into the eventual resting point for interest rates beyond the ongoing cycle of rate hikes.
EUR/USD daily chart
After undergoing a notable downturn to touch a two-month nadir in the prior week, Bitcoin is currently in the process of reclaiming those losses and maintaining a position at a value of $26,129. This resurgence follows a period of decline triggered by the interplay of rising US yields and China's economic deceleration, which prompted substantial selling pressure
BTC/USD daily chart
Investors are eagerly awaiting an upcoming speech by Federal Reserve Chair Jerome Powell, which is poised to illuminate both the trajectory of the economy and the future path of interest rates.
Scheduled for 10:05 am ET on Friday, Powell's address comes in the wake of the release of minutes from the central bank's July meeting last week. These minutes unveiled that a majority of policymakers remain wary of potential upward risks to inflation. This implies that the possibility of further increases in interest rates remains a plausible scenario.
Of specific significance to investors is Powell's stance on whether additional tightening of monetary policy will be requisite to counteract inflationary pressures, or whether the strides made thus far are deemed sufficient to uphold the present rate posture. Furthermore, market observers are poised to pay keen attention to any hints suggesting that the Fed is contemplating the prospect of rate reductions in the year 2024.
Federal Funds Rate
Based on the Fed Funds Rate futures, traders are assigning a substantial 88.5% probability that the Federal Reserve will opt to maintain interest rates at their current levels during the upcoming September meeting. This emphasizes the prevalent sentiment surrounding the immediate trajectory of interest rates.
Looking ahead to Wednesday, both the Eurozone and the UK are gearing up to release their PMI (Purchasing Managers' Index) data – a pivotal metric with the potential to offer crucial insights into the prospective actions of central banks. These figures hold the capacity to influence the decision-making process of the European Central Bank (ECB) as they weigh potential interest rate adjustments for September. Additionally, the PMI data may have a tangible impact on considerations for a substantial rate hike by the Bank of England.
Eurozone Manufacturing PMI
In the past few months, there has been a noticeable decline in both Eurozone and UK PMIs, underscoring a dual challenge of sluggishness in the service sector and a contraction in manufacturing activity.
Market participants are maintaining a vigilant watch on ECB President Christine Lagarde's upcoming speech at the Jackson Hole symposium, scheduled for Friday. Analysts are parsing her words meticulously, searching for any hints that might provide insights into the central bank's intended course of action come September.
Lagarde's statements in July underscored the ECB's receptive approach to forthcoming rate determinations. She emphasized that policymakers were entering a phase where data-driven decisions would play a pivotal role in shaping their future choices. This commitment to a flexible and data-dependent strategy adds an additional layer of intrigue to her impending address at the symposium.
Canada - New Housing Price Index (MoM) (Jul)
Friday witnessed a nuanced portrayal of the US stock market, portraying a landscape where glimpses of the US economy's strength are juxtaposed with apprehensions regarding the sustained upholding of elevated interest rates.
The Dow Jones Industrial Average managed a modest ascent of 30 points, marking a marginal uptick of 0.1%. In contrast, the S&P 500 exhibited a minor decline of 0.2%, while the NASDAQ Composite endured a more pronounced drop, experiencing a notable decrease of 0.5%.
NASDAQ indices daily chart
SPX indices daily chart
The technology sector bore the brunt of losses, with recent fragility compounding concerns that the upward trajectory of Treasury yields, particularly detrimental to growth-focused sectors like technology, might endure. This unease has been intensified by the anticipation that Federal Reserve Chair Jerome Powell will reassert the necessity for an extended phase of elevated interest rates at the imminent Jackson Hole symposium in the coming week.
In the midst of these unfolding events, Treasury yields experienced a momentary respite on Friday, a temporary pause that closely followed the 10-year Treasury yield's ascent to its highest point since 2007 during the preceding session.
Should the current trajectory persist, it raises the possibility of further gains in the 10-year Treasury yield, potentially leading to a breakthrough towards the significant 5% threshold.
On the currency front, the dollar capitalized on its momentum after achieving five consecutive weeks of advancement. Investors have now turned their attention to the Federal Reserve's Jackson Hole symposium, in search of insights into the eventual resting point for interest rates beyond the ongoing cycle of rate hikes.
EUR/USD daily chart
After undergoing a notable downturn to touch a two-month nadir in the prior week, Bitcoin is currently in the process of reclaiming those losses and maintaining a position at a value of $26,129. This resurgence follows a period of decline triggered by the interplay of rising US yields and China's economic deceleration, which prompted substantial selling pressure
BTC/USD daily chart
Investors are eagerly awaiting an upcoming speech by Federal Reserve Chair Jerome Powell, which is poised to illuminate both the trajectory of the economy and the future path of interest rates.
Scheduled for 10:05 am ET on Friday, Powell's address comes in the wake of the release of minutes from the central bank's July meeting last week. These minutes unveiled that a majority of policymakers remain wary of potential upward risks to inflation. This implies that the possibility of further increases in interest rates remains a plausible scenario.
Of specific significance to investors is Powell's stance on whether additional tightening of monetary policy will be requisite to counteract inflationary pressures, or whether the strides made thus far are deemed sufficient to uphold the present rate posture. Furthermore, market observers are poised to pay keen attention to any hints suggesting that the Fed is contemplating the prospect of rate reductions in the year 2024.
Federal Funds Rate
Based on the Fed Funds Rate futures, traders are assigning a substantial 88.5% probability that the Federal Reserve will opt to maintain interest rates at their current levels during the upcoming September meeting. This emphasizes the prevalent sentiment surrounding the immediate trajectory of interest rates.
Looking ahead to Wednesday, both the Eurozone and the UK are gearing up to release their PMI (Purchasing Managers' Index) data – a pivotal metric with the potential to offer crucial insights into the prospective actions of central banks. These figures hold the capacity to influence the decision-making process of the European Central Bank (ECB) as they weigh potential interest rate adjustments for September. Additionally, the PMI data may have a tangible impact on considerations for a substantial rate hike by the Bank of England.
Eurozone Manufacturing PMI
In the past few months, there has been a noticeable decline in both Eurozone and UK PMIs, underscoring a dual challenge of sluggishness in the service sector and a contraction in manufacturing activity.
Market participants are maintaining a vigilant watch on ECB President Christine Lagarde's upcoming speech at the Jackson Hole symposium, scheduled for Friday. Analysts are parsing her words meticulously, searching for any hints that might provide insights into the central bank's intended course of action come September.
Lagarde's statements in July underscored the ECB's receptive approach to forthcoming rate determinations. She emphasized that policymakers were entering a phase where data-driven decisions would play a pivotal role in shaping their future choices. This commitment to a flexible and data-dependent strategy adds an additional layer of intrigue to her impending address at the symposium.
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