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Weekly Outlook: Aug 19 - 23

Investing.com - This week all eyes will be on the Federal Reserve as investors wait for fresh insights on how it may respond to growing fears of a recession after the Treasury yield curve inverted. The Fed will hold its annual gathering in Jackson Hole later in the week, where Chairman Jerome Powell is to deliver what will be a closely watched speech Friday. It will publish the minutes of its July meeting on Wednesday.

The dollar ended roughly flat on Friday, retracing the morning’s move higher, after worries tied to trade tensions and a Federal Reserve rate cut weighed on consumer sentiment and a report that Germany may run a deficit to boost growth lifted the euro.

Earlier Friday, the euro fell to a two-week low of 1.1067 shy of the two-year low of 1.1025 it reached on Aug. 1. Friday morning's fall was caused by growing expectations of an interest rate cut by the European Central Bank after Governing Council member Olli Rehn suggested on Thursday the central bank could restart its quantitative easing program and was open to extending it into equity purchases.

“Global markets started Friday in a better mood with sentiment boosted by expectations for the European Central Bank to err on the side of bold stimulus as soon as central bankers’ coming meeting on Sept. 12,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.

Also pulling the dollar lower was the University of Michigan consumer sentiment index which fell to 92.1 early this month, the lowest reading since January, from 98.4 in July. The survey’s current conditions measure dropped to its lowest level since late 2016.

The consumer sentiment data came after the Treasury yield curve inverted this week, which historically has preceded U.S. recessions.

Measured against a basket of six other major currencies, the U.S. dollar index was higher by 0.06% at 98.062. Since hitting a three-week low on Aug. 9, the dollar index has recovered, rising 1.1%

The pound advanced broadly on Friday, notching up its biggest daily rise versus the euro in nearly five months, as a combination of news and decent data provided enough ammunition to speculators to buy the struggling British currency.

The pound advanced to an eight-day high versus the greenback and also jumped 1% against the euro, its biggest single day rise since late March.

The dollar was up 0.25% against the yen at 106.36. For the week, the greenback was up 0.67% against the Japanese currency.

The dollar was higher at 0.9782 Swiss franc, for a 0.6% weekly gain.

Ahead of the coming week, Investing.com has compiled a list of significant events likely to affect the markets.

Tuesday, Aug 20

German PPI (Jul)

Canada Manufacturing Sales (Jun)

U.S. FOMC Member Quarles Speaks

Wednesday, Aug 21

Canada CPI (Jul)

U.S. Existing Home Sales (Jul)

U.S. FOMC Meeting Minutes

Thursday, Aug 22

Eurozone Manufacturing&services PMIs (Aug)

U.S. initial jobless claims

U.S. services PMI (Aug)

U.S. Jackson Hole Symposium

Friday, Aug 23

U.S. Fed Chair Powell Speaks

U.S. New Home Sales (Jul)

U.S. Jackson Hole Symposium

--Reuters contributed to this report

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