Article / 22 August 2016 at 7:01 GMT

Morning markets: Fed intentions centre stage again



  • US: Chicago Fed National Activity Index (1230 GMT)

This week was supposed to be all about the wait for Friday's keynote address at the Jackson Hole symposium by Fed chief Janet Fischer. But meantime, her deputy, Stanley Fischer, appears to have stolen her thunder with an upbeat diagnosis of the state of the US economy in which he said that core inflation was within reach of the bank's 2% target and that the employment picture had improved considerably over recent years.

All in, this rosy assessment increases the likelihood of a US interest rate hike this year – perhaps as early as September. The US dollar strengthened in response to this seemingly buoyant new tone from the Fed and stayed well clear of the psychologically important 100.00 level against the Japanese yen throughout Asian trade. It was also firmer against sterling and other major  currencies.

This week's data schedule includes GDP updates from both the UK and Germany. Both are expected to have shown improvement on a quarter-by-quarter basis with the important proviso that business investment in the UK will likely have decreased in the run-up to the Brexit vote.

Market signals

Asian session

  • The South Korean market led losses in early Asian trade 
  • BoJ governor says there’s a 'sufficient chance' of more easing at next month's meeting
  • Japanese companies say the government's latest stimulus will not boost the economy
  • Urjit Patel was appointed the new Reserve Bank of India Governor 
  • The world's fourth largest iron-ore producer Fortescue tripled its annual net profit
  • In mid-Asian trading, the MSCI Asia Pacific Index of shares dropped to a two-week low
  • WTI oil fell to $48.09/barrel and silver led losses among precious metals
  • Brent crude futures were trading at $50.13/b, down 1.5%
  • The yield on 2-year Treasuries rose 3 bps to a two-month high of 0.78%
  • Regional stockmarkets were flat on expectations of a hawkish signal from the Fed
  • The Nikkei was up 0.26% at 0500 GMT at 16,588.64, a gain of 0.26%
  • At 0505 GMT, the Hang Seng was down 0.42%, and Shanghai fell 0.59%
  • The Mumbai Sensex was down 0.5% at 0505 GMT
  • The ASX/S&P 200 was down 0.19% at 0529 GMT, a loss of 10 points
  • UBS says ASX set to record a "grim" overall 8% fall in earnings per shares

Forex ahead

  • The US dollar strengthened versus all of its major peers in mid-Asian trading
  • The Aussie fell 0.9% after the USD surged on bullish Fed speeches
  • South Korea’s won fell 0.9% against the USD and NZD lost 0.8%
  • The yen dropped 0.6% to around 100.84 per USD

From the Floor

Next please. “The Fed would like to see the fiscal side pick up the baton”, says Hardy.

Rate move. “It’s probably a little bit too early in September but we definitely could see it soon if we avoid any shocks”, says Garnry

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Today’s Chicago Fed release offers new context for evaluating the Q3 outlook, explains James Picerno, adding that growth is moving in the right direction again.

Bullish talk
The USD rallied following two bullish Fed speeches on the weekend, writes Singapore's Saxo trading team, with the Fed saying it's close to meeting targets for employment and inflation.

Macro Monday

Don't expect too much from Janet Yellen or anything interesting from Jackson Hole this week - it's all going to hot up after September 2, says Kay Van-Petersen.


 An upbeat Fischer makes us reassess rate expectations. Again. Pic: iStock

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