市场资讯及洞察

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在本周，除了deepseek的横空出世，全球金融市场的目光还聚焦于美联储即将公布的利率决议。市场普遍预期美联储将维持当前利率不变，但特朗普总统近期的降息呼声为这一决议增添了不确定性。自2024年下半年以来，美联储连续三次降息，每次25个基点，将联邦基金利率目标区间下调至4.25%-4.50%。这一系列降息的主要目的在于应对经济增速放缓，降低借贷成本并且缓解通胀压力。然而，近期数据显示，美国经济呈现出复杂的信号。2024年12月，非农就业人口增加25.6万人，远超市场预期的16.5万人，失业率降至4.1%。与此同时，通胀虽然回落但其实依旧高于预期，12月CPI同比上涨2.9%，核心CPI同比上涨3.2%，略低于预期的3.3%，但仍然高于美联储2%的通胀目标。

根据CME“美联储观察”，市场预期美联储在1月30日的会议上维持利率不变的概率为99.5%，降息25个基点的概率仅为0.5%。然而，特朗普总统近期表示，希望美联储立即降息，声称自己“比美联储更懂利率”，并计划在“合适的时候”与美联储主席鲍威尔讨论此事。特朗普的表态引发市场对美联储独立性的担忧，毕竟特朗普曾经在2018到2019年强烈要求美联储降息，并且最终却是促成了美联储从2019年下半年开始降息，这表明虽然美联储强调政策独立，但政治影响依然不容忽视，所以特朗普这次的发言也增加了对未来货币政策走向的不确定性。本周，除美联储外，欧洲央行、瑞典央行、加拿大央行、巴西央行和南非央行等也将公布利率决议。其中，欧洲央行备受关注。多位欧洲央行官员表示支持进一步降息，行长拉加德在进入静默期前表示，渐进式降息可能会持续，政策制定者有信心通胀率将在2025年达到2%的目标 。市场普遍预计欧洲央行将在本周会议上将关键政策利率下调25个基点，未来可能还会进一步降息。

在当前环境下，我们应该重点关注以下方面：1. 美联储的政策声明和鲍威尔的讲话：任何关于未来货币政策方向的暗示都可能引发市场波动。2. 全球其他央行的政策行动：尤其是欧洲央行的降息决定及其对欧元区经济的影响。3. 特朗普政府的政策动向：特别是可能对美联储施加的压力，以及对全球贸易政策的影响。总体而言，本周的央行决议和相关政策声明将为我们下一步的投资决策提供重要的指引，帮助我们在全球经济充满不确定性的背景下作出适合自己的决定。此外，作为投资者我们还要密切关注关注即将公布的美国2024年第四季度GDP初值，以及即将发布的科技巨头财报，这些数据将为评估经济健康状况和企业盈利能力提供进一步的线索。在全球经济充满不确定性的背景下，央行的政策决策和政府的政策动向将对市场产生深远影响。投资者需密切关注这些动态，以制定相应的投资策略。免责声明：GO Markets 分析师或外部发言人提供的信息基于其独立分析或个人经验。所表达的观点或交易风格仅代表其个人；并不代表 GO Markets 的观点或立场。联系方式：墨尔本 03 8658 0603悉尼 02 9188 0418中国地区(中文） 400 120 8537中国地区(英文） +248 4 671 903作者：Yoyo Ma | GO Markets 墨尔本中文部

First – let us just say that as we suspected the AUD jolted all over the place on the release of the May CPI – the read was much stronger than consensus and the fallout from the read ongoing. But, and it’s a but, we predicted the AUD’s initial bullish reaction was counted by once again point to the fact parts of the monthly read can be explained away by changes made in May 2023. With that trade taken care of – we need to look to how things might transpire over the next period.

And that means digging through the monthly read for what matters and what doesn’t and thus start to assess an environment where the ‘frighten hawk’ that is the RBA moves on rates. May CPI 4.0% year on year – highest read since November 2023 So where are we? The non-seasonally adjusted monthly CPI indicator for May 2024 came in at 4.0% year-on-year smashing market consensus 3.8%, marking the highest rate since November 2023, the third consecutive monthly rise and marking 5 months since inflation was on a downward trajectory.

This jump needs to be put into context too April 2024 CPI was 3.6% year on year, the trough of 3.4% year on year observed from December to February feels like a distant memory. However as we mentioned above the market has found reason to back track on its initial bullishness most likely due to the month-over-month CPI in May 2024 decreased by -0.1% aligning with the 'seasonal average' of -0.1% since 2017. Compare that to the +0.7% month on month increase in April 2024, well above the seasonal average of +0.3%.

However the RBA doesn’t use headline CPI seasonally adjusted or not – it cares about core inflation which strips out the top and bottom 15%. And that means looking at trimmed mean CPI. The trimmed mean CPI, spiked to 4.4% year on year, also the highest reading since November 2023.

This marks a significant reacceleration from the 3.8% year on year low in January and the 4.1% year on year rate seen last month. As has been the case for most of 2024 goods inflation has remained steady holding around 3.3% year on year. The issue is services inflation which has surged to 4.8% year on year.

Another part of the inflation ‘story’ as to why inflation is so high has been global supply. However, the data has proven this to be false. Tradables (inflation that has international exposure) although rebounding in May to 1.6% from 1.1% is well below current inflation issues.

Non-tradables (domestic only facing inflation) remains well above target at 5.2% in May from 5.0% in April. This is a domestic-led spending issue and why the RBA is in play. Key Date: 31 July Second quarter CPI is out July 31 – as mentioned in Part 1 there is still some inputs that will be released in the coming 4 weeks that will shift expectation and consensus.

But in the main the consensus read now are pretty close to the final reads. The headline CPI is now expected to rise by 1.0% quarter on quarter (range 0.7% - 1.2) and 3.9% year on year (range 3.6% to 4.1%), above the RBA's May 2024 Statement on Monetary Policy (SOMP) forecast of 3.8% but possibly ‘tolerable’ but only just. A caveat to this figure is fuel price expectations for June, which sits at a decline of -1% month on month, which would subtract approximately ~4 basis points from the headline CPI.

But we digress as the trimmed mean consensus forecasts however are a concern and might not be tolerable for the RBA. Consensus forecasts for trimmed mean sits at 1.0% quarter on quarter (range 0.8 to 1.1%) and for a year on year increase of 3.9% year on year rise (range: 3.7% to 4.1%) also above the RBA's forecast of 3.8% year on year. Any slip into 4% on the trimmed mean figure and Augst 6 will be green lit.

The trade So how to position for the coming 5 weeks ahead of the August 6 meeting. Firstly understand that consensus amongst the economic world is the August meeting has a 35% risk of seeing a hike. The market is stronger at 45% - however it was as high as 61% at the peak of the bullishness post the inflation drop.

We should also point out that pre-June 5 the pricing in the market was for cuts not hikes. Showing just how fast and hard the interbank and bond markets have swung around. We also need to return to Governor Bullock's hawkish June press conference where the Board considered a rate hike and did not entertain a rate cut.

We also pointed out that every time the Board has added this sentence to the statement: The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome. It has seen a rise in the preceding meeting. We believe this give the upside potential more impetus and that will positively push the AUD higher over the coming weeks something we think is not fully factored into trading to date.

Then there are the other asset classes. Hikes complicates the outlook for equities, particularly as inflation remains sticky, especially in the services. Thus which sectors and areas of the equity market sure we be on the look to for signs of stress?

A prolong period of weakness in domestic trading conditions and the likely rise of frugal consumer behaviour will present challenging earnings for first half of fiscal year 2025 for discretionary and service sector stocks. Couple this with evidence of a slowdown in housing activity, material handling, product and construction stock are also likely to face pressure in early FY25. Need to also address Banks – which have been one of the best trades in FY24 with CBA leading the pack here, the question that remains however is that bank price growth in FY24 has been due to rate cut expectations and optimistic credit-quality risks.

This explains the elevated bank trading multiples. Weakening housing activity, will likely see investors questioning multiples of this nature in the near future. Trading the inflation story over the coming 5 weeks will be fascinating.

We have been discussing Sahms’ law for the last few weeks. This is the regression indicator that signals the possibility of recession. For those that can't remember, Sahms' recession indicator is when the three-month moving average of the unemployment rate has risen by more than 0.5 per cent from the previous 12 month low.

Every time this has happened since 1950 the US has entered a recession. Which brings us to last Friday’s non-farm payroll (NFP). NFP August jobs report revealed that total nonfarm payrolls grew by just 142,000, while private sector job growth amounted to a meagre 118,000.

That is the lowest read since COVID and both figures fell well short of consensus expectations. Even more concerning, revisions to June and July payrolls subtracted a combined 86,000 jobs, further underscoring the weakness in the labour market. That is on top of the 816,000 downward revisions of the January through May figures which saw the NFP overestimating the monthly employment figures by 69,000.

The next piece of the puzzle – a piece that backs the Sahms’ law puzzle is the three-month average for private sector job growth has now fallen below 100,000 per month, a pace that typically signals the onset of a recession.. However some are pointing to the fact that the unemployment rate ticked down slightly from 4.3 per cent to 4.2 per cent in August as a mixed signal and that maybe things aren’t as bad as the headlines. However this modest improvement was largely due to rounding, as the unrounded rate was effectively unchanged (4.22 per cent in August vs. 4.25 per cent in July).

This followed an earlier increase in unemployment, which had been trending higher over the past few months. The rise in the unemployment rate, combined with slowing job growth, indicates that the labour market is likely to weaken further unless the Fed moves to ease policy – which is why we are asking – has the Fed dropped the ball by not moving already? Let’s explore that further Data from the Job Openings and Labor Turnover Survey (JOLTS) shows that firms are hiring at the slowest rate in a decade, outside of the pandemic period.

Job openings fell to 7.673 million in July, which was significantly faster than expected and brought the ratio of job openings to unemployed persons to 1.07-to-1, down from the elevated levels seen during the pandemic. This decline in job openings suggests that the labour market is normalising, but it also raises the risk of a sharper increase in unemployment in the coming months as the ratio inverts. It's not only the multitude of employment indicators flashing risk.

Other indicators reinforce the case for concern. Take the auto sales numbers, which fell below expectations, with an annualised sales rate of 15.1 million vehicles, suggesting there is now a slowdown in consumer spending. The decline in auto sales historically spreads to weaker production and employment in the auto industry, as companies adjust staffing levels in response to reduced demand.

Meanwhile, mortgage applications for new home purchases remain subdued despite a drop in mortgage rates over the last four months on rate cut expectations. The lacklustre performance in both the auto and housing markets adds to the broader picture of economic weakness. The signs are pretty clear- the slowdown is on and as the Fed weighs its options ahead of the September meeting – the final piece of the puzzle is coming inflation.

It must be said that inflation remains a key focus. Core Consumer Price Index (CPI) inflation is expected to rise by just 0.2 per cent month-on-month in August, reinforcing the view that inflation has slowed considerably, but year on year CPI is still above the Fed 2 per cent target. Inflationary pressures are easing and the greater risk to the Fed's mandate appears to be the labour market rather than inflation, but it could be the moderator on those calls for the Fed to go hard when it starts cutting.

We need to watch categories like medical services and airfares as these are ones we need to see bigger falls in the rates of price growth and could influence the Fed's decision-making. But again, the overall trend suggests inflation is no longer the primary concern. Similarly, the Producer Price Index (PPI) is expected to show a modest increase of 0.2% month-over-month, further indicating that inflationary pressures are tapering off.

Jobless claims data will also be closely watched in the coming weeks. Continuing claims are expected to rebound after an unexpected drop, driven in part by a temporary decline in claims in Puerto Rico. Any significant rise in jobless claims, particularly initial claims, could signal a shift towards more active layoffs.

Can they catch the ball? All the data mentioned highlight our concerns about the trajectory of the U.S. economy. There are clear signs of a substantial slowdown and growing risk of recession.

Thus the question now is can the Fed catch slowdown before it turns into a recession? The answer is muddled as the Federal Reserve's response to the weakening outlook remains uncertain. The base case is for the Fed to initiate a series of rate cuts in the coming months.

Currently, projections indicate that the Fed may cut rates by 50 basis points (bp) in September followed by a smaller 25 bp cuts over the proceeding meetings. However, the pace and magnitude of these cuts remain open to adjustment, depending on the evolving economic conditions. While this is the view of the market, the Fed is not as united as this – for example: Federal Reserve Governor Christopher Waller has expressed a more measured approach.

In his September 6, 2024 speech, Waller emphasised that he prefers to see more data before endorsing larger rate cuts of 50 bp rather than the more conservative 25 bp. He signalled that the Federal Open Market Committee (FOMC) needs to remain flexible and should adjust its actions based on new data rather than adhering to preconceived timelines for rate cuts. The issue with this view is that data is retrospective and by the time it's presented it would be too late to catch the slowdown.

He expressed willingness to support larger cuts if the data shows further deterioration, drawing parallels to his previous support for front-loading rate hikes when inflation surged in 2022. But again – the argument against this stance is it could be too little too late. Waller’s remarks suggest that the Fed could adopt a cautious approach in September, potentially starting with a 25 bp cut but leaving room for larger cuts if economic data continues to weaken at either the November or December meeting.

So could the Fed drop the ball? We think the word to use here is “fumble”. There are clear signs of disagreements around, size, speed and effects of cuts, which may cause them to fumble the response in the interim, over the medium term it will align, whether they catch or drop the ball – time will tell.

In short – we are in for a volatile period in FX, already the USD has been falling on rate fundamentals, but rallies on recession fears. The drive to safe havens over risk plays will be a strong theme in the coming period and will likely override any interest rate differential trade plays that present. It is going to be an interesting period culminating in the US election in November, thus be ready to be nimble and accept swings that seem to go against traditional trading theories.

So FY24 earnings are now done and from what we can see the results have been on the whole slightly better than expected. The catch is the numbers that we've seen for early FY25 which suggested any momentum we had from 2024 may be gone. So here are 8 things that caught our attention from the earnings season just completed.

Resilient Economy and Earnings Performance Resilience surprises remain: The Australian economy has shown remarkable resilience despite higher inflation and overall global pessimism. The resilience was reflected in the ASX 300, which closed the reporting season with a net earnings beat of 3 percentage points - a solid beat of the Street's consensus. This beat was primarily driven by better-than-expected margins, indicating that companies are effectively managing cost pressures through flexes in wages, inventories and nonessential costs.

The small guy is falling by wayside: However, the reporting outside of the ASX 300 paints a completely different picture. Over 53 per cent of firms missed estimates, size cost efficiencies and other methods larger firms can take were unable to be matched by their smaller counterparts. The fall in the ex-ASX 300 stocks was probably missed by most as it represents a small fraction of the ASX.

But nonetheless it's important to highlight as it's likely that what was seen in FY24 in small cap stocks will probably spread up into the larger market. Season on season slowdown is gaining momentum Smaller Beats what also caught our attention is the three-percentage point beat of this earnings season is 4 percentage points less than the beat in February which saw a seven-percentage point upside. That trend has been like this now for three consecutive halves and it's probable it will continue into the first half of FY25.

The current outlook from the reporting season is a slowing cycle, reducing the likelihood of positive economic surprises and earnings upgrades. Dividend Trends Going Oprah - Dividend Surprises: Reporting season ended with dividend surprises that were more aligned with earnings surprises, with a modest DPS (Dividends Per Share) beat of 2 percentage points. This marked a significant improvement from the initial weeks of the reporting season when conservative payout strategies led to more dividend misses.

The stronger dividends toward the end of the season signal some confidence in the future outlook despite conservative guidance. However, firms that did have banked franking credits or capital in the bank from previous periods they went Oprah and handed out ‘special dividends’ like confetti. While this was met with shareholder glee, it does also suggest that firms cannot see opportunity to deploy this capital in the current conditions.

That reenforces the views from point 2. Winners and Losers - Performance Growth Stocks Outperform: Growth stocks emerged as the clear winners of the reporting season, with a net beat of 30 percentage points. This performance was driven by strong margin surprises and the best free cash flow (FCF) surprise among any group.

However, there was a slight miss on sales, which was more than offset by higher margins. Sectors like Technology and Health were key contributors to the outperformance of Growth stocks. Stand out performers were the likes of SQ2, HUB, and TPW.

Globally-exposed Cyclicals Underperform: Global Cyclicals were the most disappointing, led by falling margins and sales misses. The earnings misses were attributed to slowing global growth and the rising Australian Dollar. Despite these challenges, Global Cyclicals did follow the dividend trend surprised to the upside.

Contrarian view might be to consider Global Cyclicals with the possibility the AUD begins to fade on RBA rate cuts in 2025. Mixed Results in Other Sectors: Resources: Ended the season with an equal number of beats and misses. Margins were slightly better than expected, and there was a positive cash flow surprise for some companies.

However, the sector faced significant downgrades, with FY25 earnings now expected to fall by 3.2 per cent. Industrials: Delivered growth with a nine per cent upside in EPS increases, although slightly below expectations. Defensives drove most of this growth, insurers however such as QBE, SUN, and HLI were drags.

Banks: Banks received net upgrades for FY25 earnings due to delayed rate cuts and lower-than-expected bad debts. However, earnings are still forecasted to fall by around 3 per cent in FY25. Defensives: Had a challenging reporting season, with net misses on margins.

Several major defensive stocks missed expectations and faced downgrades for FY25, which led to negative share price reactions. Future Gazing - Guidance and Earnings Outlook Vigilant Guidance has caused downgrades: As expected, many companies used the reporting season to reset earnings expectations. About 40 per cent in fact provided forecasts below consensus expectations, which in turn led to earnings downgrades for FY25 from the Street.

This cautious approach reflects the uncertainty in the economic environment and the potential for slower growth ahead, which was reflected in the FY24 numbers. Flat Earnings Forecast for FY25: The initial expectation of approximately 10 per cent earnings growth for FY25 has completely evaporated to just 0.1 per cent growth (yes, you read that correctly). This revision includes adjustments for the treatment of CDIs like NEM, which reduced earnings by 2.8 percentage point, and negative revisions in response to weaker-than-expected results, guidance, and lower commodity prices.

Resources were particularly impacted, with a 7.7 percentage point downgrade, leading to a forecasted earnings decline of 2.8 percent for the sector. Gazing into FY26: Early projections for FY26 suggest a 1.3 percent decline in earnings, driven by the expected declines in Resources and Banks due to net interest margins and commodity prices. However, Industrials are currently projected to deliver a 10.4 percent EPS growth, would argue this seems optimistic given the slowing economic cycle.

The Consensus Downgrades to 2025 Earnings: The consensus for ASX 300 earnings in 2025 was downgraded by 3 per cent during the reporting season. This reflects a broad range of negative revisions, with 23 percent of stocks facing downgrades. Biggest losers were sectors like Energy, Media, Utilities, Mining, Health, and Capital Goods all saw significant consensus downgrades, with Media particularly facing downgrades as budgets are slashed in half.

Flip side Tech, Telecom, Banks, and Financial Services, saw aggregate earnings upgrades. Notably, 78 percent of the banking sector received upgrades, reflecting some resilience in this group. Cash Flow and Margin Surprises Positive Cash Flow: Operating cash flow was a positive surprise, with 2 percentage point increase for Industrial and Resource stocks reporting cash flow at least 10 per cent above expectations.

The main drivers of this cash flow surprise were lower-than-expected tax and interest costs, along with positive EBITDA margin surprises. Capex: There were slightly more companies with higher-than-expected capex, but the impact on overall Free Cash Flow (FCF) was modest. Significant positive FCF surprises were seen in companies like TLS, QAN, and BHP, while WES, CSL, and WOW had negative surprises.

Final nuts and bolts Seasonal Downgrade Patterns: The peak in downgrades typically occurs during the full-year reporting season, so the significant downgrades seen in August are not necessarily a negative signal for the market. As the year progresses, the pace of downgrades may slow, and there could be some positive guidance surprises during the 2024 AGM season. However, with a slowing economic cycle, the likelihood of positive surprises is lower compared to 2023.

Overall, the reporting season highlighted the resilience of the Australian economy and the challenges facing certain sectors. While Growth stocks outperformed, the outlook for FY25 remains cautious with flat earnings growth and sector-specific headwinds. Investors will need to navigate a mixed landscape with potential opportunities in contrarian plays like Global Cyclicals, but also be mindful of the broader economic uncertainties.

We now have a post-Jackson Hole set of questions – will the data stick up to what was preached. Reviewing the reactions to Jackson Hole treasury yields declined on a ramp up in bets around the Federal Funds rate after Federal Reserve Chair Jerome Powell's dovish remarks, which were in line with what we forecasted last week. His dovish remarks were enough to shift market expectations for the September Federal Open Market Committee (FOMC) meeting not just towards a potential rate cut, but to a possible heavier cut (50 basis points or more).

Current market pricing for September is above 30 basis points suggesting it is keeping some of its powder dry ahead of the mid-September meeting. But it wasn’t the absolute nail in the hawkish view some were hoping. The current economic environment is making markets highly reactive.

Every piece of data that could indicate whether the U.S. economy is heading for a "hard" or "soft" landing is being scrutinised. That is particularly evident post the softer employment data released in early August, and thus we traders still have plenty of volatility to play with in the coming weeks. Jackson Hole in review Chair Powell's remarks at Jackson Hole signalled the shift in the Fed's focus we all expected.

But it is where the focus has shifted to that matters – the Board’s focus has shifted from inflation to labour market concerns. He emphasised that the Fed does not seek further cooling in labour market conditions and noted that the labour market is looser now than it was in 2019 when inflation was below 2%. While Powell did not specify the size of potential rate cuts, he indicated that the current policy rate gives the Fed ample room to respond to any risks, suggesting that rates are still far from neutral and could return to that level relatively quickly.

The market has taken this change in focus to pencil in the next most important date into its calendar – September 6. This is when the August employment data will be released, and it will be crucial in determining whether the Fed opts for a 25 basis point or a 50 basis point rate cut 10 or so days later. If the unemployment rate remains at 4.3% or rises further, comments suggesting that the labour market is “strong” would appear to be out of touch, and language like this sounds eerily similar to the previous underestimation of inflation being "transitory." So lets drill into what will be the biggest driver of FX and indices ahead of the September meeting - labour The Labour Market the Key to all In the coming weeks, the most critical economic data will revolve around the labour market, as its health will determine whether consumer spending and overall economic activity has remained strong.

The Bureau of Labor Statistics recently estimated that payroll employment as of March 2024 is 818,000 lower than initially thought. Think about that for one second, that is the entire population of the Gold Coast and 80,000 more or to put into Australian numbers its 60,000 jobs less than originally suggested. This has moved the average monthly figure down by 68,000 jobs for the period from April 2023 to March 2024 going from 247,000 a month to 179,000 a month.

The Fed needs to average 200,000 for the economy to be running at neutral. Although these revisions are not finalised until February 2025, the significance is clear - the jobs market is not as strong as previously believed and suggests like we discussed last week that the US could be skidding into a recession based on the Sahms recession indicator. Which is when the three-month moving average of the national unemployment rate is 0.5 percentage point or more above its low over the prior twelve months.

This was triggered in early August and we saw what that led to. What has also caught traders off guard is that historically, revisions to payrolls have been to the upside versus preliminary estimates, mainly due to delays in receiving more complete data from the Quarterly Census of Employment and Wages (QCEW). But when we look at periods of economic stress, take 2009 for example, the final estimates have sometimes shown even larger downward revisions than what we have seen this year.

This trend might be due to the overestimation of factors like the birth-death adjustment and part-time to full-time payrolls, which could be happening again now. If 2024 estimates are indeed overstated, it suggests that July's job growth was more likely to be 114,000 jobs, a figure that may not be confirmed until the next year's benchmark revisions. But a massive USD risk whatever the final figure turns out to be.

We stated last week that despite USD dovish trading over the past few weeks. It’s far from overdone. And we see the labour force data for the rest of the year being key to possible further selling Divergence Between Payroll Growth and Unemployment That brings us to the growing divergence between strong payroll job growth and rising unemployment.

We need to point out here this is not just a US phenomenon, Australia is seeing this situation as well, and it’s to do with the participation rate which is sneaking up. This means more people are falling back into the employment surveys suggesting unemployment might be higher than reported. So despite the robust employment growth figures – unemployment is on the rise faster than growth.

Housing Market Switching to the other great indicator for the Fed and FX traders alike – housing. Existing home sales rose modestly in July, yet new home sales increased at a surprisingly strong pace – however thankfully they remain within recent ranges. Despite a recent decline in mortgage rates (see the 30-year rates as the benchmark here), there has been no significant uptick in new demand, with mortgage applications for purchases remaining low and higher-frequency sales indicators still soft.

Although not on the same level as the labour market for FX movements, signs of overconfidence, increased mortgage applications and existing home sales spikes would get the FOMC’s hawks crowing again. These members have suggested that there hasn’t been sufficient housing stress yet to signal a hard sustained cutting cycle is imminent making housing data the contrarian trade indicator. The conclusion We retain the view that the USD is facing continued head winds, labour data is weakening, the economy is slowing to levels that suggest it could be flirting with recession and inflation is back in sight of the 2% handle.

There is also one other piece of information that allows us to retain our bearish view on the USD… Don’t Fight the Fed! – if they want to cut, they will take the USD with it.

Jackson Hole Symposium – When doves try Market pricing of the Federal Funds rate currently sits at 93 basis point of easing by year-end. Let us put that into perspective it was 110 basis points of easing at the peak of excitement, yet despite the increase in yields DXY has sold off and now trades sub-102.00 and is still falling like a stone. Why?

It's not like EUR/USD data from Europe is smashing USD bulls, European PMIs are expected to be around 50.1, a barely expanding outlook. So it's not that. Second point some are highlighting is the rise and rise of Vice President Harris.

The odds of her taking the Oval Office are mounting by the day. On the day it was announced she will be Democrats presumptive nominee her odds of winning according to Predictit.org was 45c now: She is odds on. Which has put her policies front and centre, including her latest announcement of possible increase to the corporate tax rate to as high as 28 percent.

That might explain DXY’s fall. But really it looks to be down to the only event that has mattered all year – when is the Fed going to cut rates? The off again on again nature of where the Fed sits has been down to the surprise rally in inflation in the March quarter and this has led to Board dissent, mis-matching communication and a general rudderless trading in bonds, FX and like as Powell and Co. faffed about.

That appears like its going to end this week as we turn our attention to Wyoming and the annual Jackson Hole Monetary Policy Symposium. Everything is gearing up to a Jerome Powell speech that will finally set the ship on a clearer path. Why do we think this?

Because history shows that Jackson Hole is normally when Fed Central Banks lay out their playbooks for the coming period. For example: In 2010 as the world and the US struggled to break out of the slump created by the Global Financial Crisis then-Fed Chair Ben Bernanke hinted (practically mapped out) the second series of Quantitative Easing, the bond-buying program designed to stimulate growth and maintain price stability. The markets responded fervently to the money taps being opened further, and the bulls that were long made a killing.

Then in 2020 Now-Fed Chair Jerome Powell announced a major shift in Fed policy framework, introducing average inflation targeting rather than the hard and fast figure of the previous generations. This meant the Fed would now be able to tolerate price fluctuations and periods of time where inflation might hold above the traditional 2% target before raising interest rates. This was in response to COVID and having the ability to flex policy due to the unforeseen nature COVID was creating.

In 2024 – will August 23 be another point for the history books? The doves certainly think so. Expectations are he will map out what the board is willing to tolerate around inflation as recent economic data points are a mixed bag which include: An easing Inflation rate, with July’s consumer price index falling below 3 per cent for the first time since 2021 but at 2.8 percent is still well off target and is falling at a slower pace than forecasted.

Consumer spending remains strong despite the first rate rise in the Federal Funds rate taking place over 20 months ago. July’s retail sales report showed a 1 per cent increase, well above expectations. Then there is the labour market, which was the cause of the recent market volatility due to what is known as Sahm’s recession indicator.

US non farm payrolls in the month of July came in at 4.4 percent - this is low by historical standards but it's the speed of change that triggered the Sahms recession indicator. Since 1950 every time the three-month moving average of the unemployment rate has risen by more than 0.5 percent from the previous 12 month low, The US has entered a recession. That's what is so telling for the market and why the doves are really trying to push The US dollar lower.

Powell is clearly facing a race against time in catching the economy and the unemployment rate before the handbrake in higher interest rates, which has been doing its job, stops working and causes the US to skid and crash. With all this as his “data dependent” input, Powell's remarks will be closely watched for further confirmation of an anticipated interest rate cut that is expected in September. As mentioned above the market has 93 basis points come year end.

With only three more meetings before the end of the year – one of the meetings could have a double notch cut associated with it. Will it be September? That is where Jackson hole comes in for the following reasons: A 25-basis-point cut may not be sufficient to prevent the economy from slipping into a recession, as higher rates make it more challenging for businesses to borrow and grow.

A 50-basis-point cut, on the other hand, risks reigniting inflation and sparking another speculative bull run in the markets, as cheaper borrowing costs could lead to increased risk-taking. Jackson Hole gives Powell the ability to test out the market’s appetite and concern, on this last point. If the response to a 50-basis point cut leads to speculative trading, and inflation fears before the September meeting then it will likely take the softer path.

If however the markets suggest this isn’t enough to ‘stop the skid’ then come December the 93 plus basis point cuts forecasted are on. Which brings us to the final point. Is the USD oversold?

In short – no. Yes, bearish beats are growing but looking at the likes of the EUR/USD, AUD/USD, GBP/USD and USD/CAD none of these are screaming oversold. In fact there is clear room for further runs particularly in the first two.

So set your alarm clocks – Jackson Hole is going to provide the playbook for the rest of the FX year.