This week, central bankers will convene in the US state of Wyoming to discuss economic outlooks and monetary policies. Key economic data is expected to drive further volatility in the financial markets.
ADVERTISEMENTFollowing the broad rebound in global stock markets, investors are keen to see more evidence that the global economy is moving in the desired direction, such as cooling inflation, lower interest rates, and economic recovery. Market focus will be particularly on the two-day Jackson Hole Symposium, attended by central bankers and other key financial participants.
Additionally, flash manufacturing and services Purchasing Manager Index (PMI) data will be released from major economies, including the Eurozone, the UK, and the US. The Federal Reserve will also release its meeting minutes for August, which is viewed as a critical event for determining its policy path.
Europe
The Eurozone's final consumer price index (CPI) for July is set to be released this Tuesday, with expectations that inflation will remain stubborn at 2.6%, up from 2.5% in the previous month. This data may reduce the likelihood of the European Central Bank (ECB) delivering a second rate cut in September. However, the decision on monetary policy will require a broader consideration of other economic indicators.
Both Germany and France are scheduled to release their flash manufacturing and services PMIs for August, along with the Eurozone's composite data. Germany's services PMI rose for the fourth consecutive month in July, reflecting positive signs of economic recovery in recent months. The French services sector also expanded in July. Consensus suggests that both service activities will continue to grow this month. However, manufacturing activities are expected to remain in contraction across the Eurozone, a trend that has persisted since July 2022.
In contrast, both services and manufacturing PMIs in the UK have been in expansion territory for the past few months. Manufacturing activities expanded for the third consecutive month in July, driven by accelerating production growth. Expectations are that both sectors will continue to grow in August, signalling further expansion in the UK's economy.
The US
The Fed's meeting minutes and the Jackson Hole Symposium are the two critical events for the US markets as well as the global sentiment. In the Fed's policy meeting last month, it held onto the interest rate for eight consecutive meetings since September 2023, and projected only one cut this year, down from an estimate of three cuts in March.
However, the odds for the bank to deliver more cuts have significantly increased since the US reported weakening job markets and cooled inflation. Markets are even pricing in a 50 basis point rate cut in September. Hence, the meeting minutes will be crucial for clues of its rate path.
More importantly, Fed Chair Jerome Powell is likely to set his tone for a September interest rate cut at the upcoming Jackson Hole Symposium. The bank always gives a clear signal for its policy path to avoid giving shocks to the financial markets and the economy, which makes this annual meeting critical for the global markets.
The US will also release its flash manufacturing and services PMs for August, gauging the world's largest economic health. In July, manufacturing activities unexpectedly fell into contraction, which sparked recession fears and added to the global market selloffs at the beginning of August. Consensus suggests that the manufacturing reading will stay contracted in July.
Asia Pacific
The People's Bank of China (PBOC) will decide on the one-year and five-year loan prime rates on Tuesday, with no changes anticipated. In July, the PBOC reduced both benchmark loan rates by 0.1% to 3.35% and 3.85%, respectively, in an effort to stimulate the economy. However, recent tepid economic data may prompt the Chinese government to implement further stimulus measures to achieve its growth target of 5% in 2024.
The Reserve Bank of Australia (RBA) will release its meeting minutes for August, a key event for local stock markets and the Australian dollar. The RBA kept the interest rate unchanged at 4.35% for the sixth consecutive time in August, stating that monetary policy will remain restrictive until inflation returns to the target level and that the interest rate path will be data-dependent.
Manufacturing and services PMIs from Japan and Australia are due for release this Thursday. Manufacturing activities in both major economies are expected to remain in contraction. Additionally, Japan's national core CPI for July is anticipated to rise to 2.7% from 2.6% in the previous month.
