The beginning of the week has seen the US Dollar Index fall toward 102 as Fed officials gave dovish comments this past Sunday and increased expectations of a September cut.
These comments are related to the main event of the week, Jackson Hole on Friday. This meeting in the US will provide Fed Chair Jerome Powell an opportunity to share when it will be the “appropriate” time to cut rates. The main question will be whether he’ll show an openness to cut rates by 50 basis points.
With the unemployment rate jumping to 4.3% in July, and higher than the 4.0% fourth-quarter forecast the FOMC issued in June, this could lead to earlier and faster rate cuts. However, the likelihood of the Fed cutting by 50bps during the FOMC meeting on Sep. 18th will ultimately depend on the August payroll report due out on September 6th, providing a better indicator of the US economic situation.
As for the Eurozone, this week’s main events will be Sweden’s Riksbank policy rate decision on Tuesday and EUR PMI Comp. on Thursday. We expect the Riksbank to resume its easing cycle and take the policy rate from 3.75% to 3.5%, looking for gradual easing. EUR PMI Comp. dropped to 50.2 in July from 50.9 in June. Coupled with the lower German ZEW survey for August, there is little expectation that activity will improve from July.
This week there is little going on for UK data apart from UK PMI Comp. on Thursday. The consensus is that the overall composite gauge will slightly increase from the previous month of 52.8, and inflationary pressures will ease over the coming months.
