Pound outperforms; Turn for central bankers to speak

Central bankers, primarily Fed Chair Powell, will speak at the Jackson Hole Symposium. The words of central bankers will take center stage, as the market looks for guidance. In terms of data, the global PMIs will be the highlight of the week.

Here is what you need to know for next week: 

It’s the turn of central bankers. The news flow is likely to be inundated with comments from central bankers. The key speech is scheduled for Friday with Federal Reserve (Fed) Chair Jerome Powell. The impact of these speeches could overshadow economic numbers. The symposium runs from August 24 to 26.

Regarding data, the highlight will be the Global PMI, which will provide a first glimpse of economic activity worldwide. These numbers will be released on Wednesday.

The cautious tone across markets will also remain in focus next week. With growing concerns, mainly from China, the deterioration in market sentiment could trigger some panic. Such a scenario could be positive news for the Japanese Yen and the US Dollar. The Dow Jones had its worst week since March, ending at five-week lows.

The US Dollar Index (DXY) rose for the fifth consecutive week, supported by US economic data, risk aversion, and higher Treasury yields. The last time it achieved such a streak was in May 2022. The DXY closed above 103.00, the highest level since June. Next week, US data includes housing reports, Jobless Claims, and Durable Goods Orders.

US Treasury yields rose during the week, with the 10-year settling above 4.20%, the highest weekly close since 2007, despite market expectations that the Fed will skip a rate hike at the September meeting.

EUR/USD reached six-week lows and ended below the 20-week Simple Moving Average (SMA), suggesting further weakness, with the next support at July lows around 1.0830. The German Producer Price Index (CPI) for July and the Bundesbank monthly report are due on Monday. On Wednesday, the S&P Global preliminary Manufacturing and Services PMI surveys for Germany and Eurozone countries will be released. On Friday, German growth data and the IFO survey.

The Japanese Yen was among the top performers due to risk aversion, and received and extra boost on Friday with the retreat in government bond yields. USD/JPY finished marginally higher above 145.00, after pulling back 146.60, the highest level since November.

USD/CHF rose for the fifth consecutive week and climbed above 0.8800; however, the long-term trend remains downward. If worries intensify in the markets, the Swiss Franc could benefit.

The Pound was the biggest gainer among majors, supported by UK economic data. The negative numbers were Retail Sales on Friday, which somewhat weakened the currency. GBP/USD ended a four-week negative streak and remained above the 20-week SMA and 1.2600.

USD/CAD rose above 1.3500, hitting the highest level since May, and continues to trend higher. Canada will report Retail Sales on Wednesday.

The Antipodean currencies were the worst performers, influenced by the Chinese outlook and the decline in commodity prices. The Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBA) are currently on pause, and despite some hawkish signs, they are not expected to resume the tightening cycle.

The Australian Dollar was the worst among the major currencies. Employment data from Australia came in below expectations. The only report on the docket for next week is the S&P Global PMI. AUD/USD fell for the fifth consecutive week, breaking below 0.6500 and testing levels below 0.6400. The bias is to the downside; however, a correction seems overdue.

NZD/USD broke the psychological level of 0.6000, falling to the 0.5900 area, the lowest since November of last year. New Zealand will report Trade data on Monday and Retail Sales on Wednesday.

Cryptocurrencies tumbled, affected by global concerns across markets. Bitcoin experienced its worst week in three months, falling to $26,000.

Gold fell below $1,900, reaching one-month lows. It remains under pressure due to a stronger Dollar and higher yields. Silver ended the week flat around $22.70, showing signs of stabilization, but it still faces challenges and uncertainties.