Market Review – Fundamental Perspective

[PCMNewsdesk]

• · Chinese equities higher amid improving data
• · Focus is on Jackson Hole starting today
• · GBPUSD rallies 0.5% back above 1.3200

Global equities traded broadly higher yesterday, driven by an improving outlook for underlying large corporations including US technology firms. Chinese equities moved higher amid new data that showed domestic industrial profits recorded the fastest m/m growth since 2018 in July (FT)
The market focus is now on the US Federal Reserve’s Jackson Hole meeting starting today, where Fed Chair Powell is expected to provide details on the Fed’s monetary policy review. Powell is speculated to signal a longer period of near-zero rates and adopt a more flexible inflation-targeting policy that could allow inflation to overshoot its current 2% annual target Bank of England Governor Bailey, ECB Chief Economist Lane and Bank of Japan Kuroda are also expected to speak over the next two days GBPUSD continued its rally yesterday and overnight, trading from around 1.3150 to above 1.3200, amid broad USD weakness and month-end flows. The Bloomberg USD Spot Index fell c.0.3% yesterday and is currently trading below 1170.00 (Bloomberg) Our GBP trader sees near-term GBPUSD support at 1.3050, ahead of 1.3000 with resistance at 1.3300, ahead of 1.3400
NZDUSD also rallied over 1% yesterday and is currently trading above 0.6620 amid the Fed’s expected rhetoric and month-end USD weakness (Bloomberg)

[PCMNewsdesk]

• Japanese Prime Minister Shinzo Abe to resign
  
• US President Trump accepts Republican Nomination
• Focus today is on UK BoE Governor Bailey’s speech at Jackson Hole

Asian stocks traded mixed overnight, with Japan’s Nikkei index down c.1.5%, but Hong Kong’s Hang Seng and China’s CSI 300 up 1.7% and 2% respectively. The fall in Japanese stocks comes after reports that Japanese Prime Minister Shinzo Abe is set to resign due to worsening health. He is set to hold a news conference at 09:00 BST (Reuters)
USDJPY traded lower following the news, from highs of c.106.90 to below 106.20 this morning (Bloomberg)GBPUSD traded broadly sideways yesterday, despite a spike in the afternoon to 1.3280. This morning, however, it has traded with a strong bid tone, moving above 1.3270 briefly. Today’s focus for GBP is Bank of England Governor Andrew Bailey’s speech virtually at Jackson Hole today. He is likely to give an update as to the Central Bank’s view on rising inflation, after US Fed Chair Powell laid out a policy that would allow for inflation to exceed the 2% target for periods of time in order to make up for past shortfalls (FT)On the final night of the Republican National Convention, US President Trump officially accepted the Republican nomination. In a speech, he said that rival Joe Biden would bring chaos to US cities, and spread socialism across the nation. He also rejected criticism of his handling of the pandemic, and said the country would have a vaccine for the disease by the end of the year (FT)