Global macro overview for 27/08/2018
In the US, the event calendar offers a consumer confidence index on Tuesday, GDP revisions for the second quarter, income and expenditure report of Americans and PCE Core (Thursday) and mood indexes of Chicago PMI and University of Michigan in the last day of the trading week. Indicators of household and business sentiment stand out in the first place, as they will allow us to assess whether recent decisions on import duties leave a mark on the economy. Disappointing readings will have more impact on USD than otherwise.
We will receive the German Ifo on Monday from the Eurozone and the preliminary CPI estimate on Friday. After the PMI readings, the chances for a solid Ifo growth this week have fallen, although any interruption of the eight-month series of declines in a row may put some optimism in the prospect of recovery in the largest Euroland economy. In terms of inflation, high energy prices should maintain the overall ratio over 2%, but at the base level, maintain 1.1%. will be a break for the fundamental rebound of the EUR. Nevertheless, there are still a lot of short positions on the market, which started to bring losses last week and the pressure to close them may become a lever for short-term increases.
This week brings an empty calendar from the UK and a bank holiday on Monday. This means that the pound will be on the brink of press relations around the Brexit negotiations, and these have recently been unfavorable. On the one hand, it facilitates GBP depreciation against USD and EUR, but also reduces adjustments. However, without surprising revelations towards a lack of agreement or soft Brexit, GBP will remain an unwanted asset, and its quotes will be devoid of direction.
In Asia, investors will be looking at PMI readings from Chinese industry on Friday, because August was the first month when the US customs war was in full force. Lowering the indicator under 51 will be a disturbing signal that will fuel speculation about the economic slowdown and will weigh on the market sentiment.
In Australia, we have a quarterly report on private equity investments (CAPEX) and building permits (both on Thursday). The reflection, especially in the mining industry, translates into expenditure on machinery and other fixed assets, which makes a solid contribution to GDP. Data from the real estate market will be an important test of the condition of the sector in the face of growing concerns about excessive household debt. Good data is enough for transitional support for AUD, because the political noise and the general picture of foundations are more in favor of weakening AUD. From New Zealand, we will also receive data on construction permits (on Thursday), which, however, will not dominate the trend dictated by the attitude towards USD and general risk appetite. Additional fuel for kiwis may emerge from Aussie differentiation if a political storm flares up in Australia.
From Canada, we will receive a GDP reading for June and the entire second quarter. Partial data for April and May and reading of retail sales and industrial production allow for a solid reading. The fundamental background remains good, although for the time being the Bank of Canada has no votes suggesting another hike in September and October seems more likely. Even so, if this weekend at the Jackson Hole Symposium President Poloz will be tempted by the hawkish mention, we can count on a CAD rally. In addition, NAFTA negotiations seem to be going well, but we are still without specificities that could revive trade on the FX.
Let’s now take a look at the SP500 technical picture at the H4 time frame. The market has made a new all-time high at the level of 287.63 and closed near this level on Friday. The market conditions are now overbought and there is a bearish divergence building between the price and the momentum indicator, so a short-term correction might occur soon. The nearest set of technical supports are at the levels of 287.27, 286.77 and 286.12. The larget time frame trend remains up and there ane no signs of any tren reversal.