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Will Powell Deliver a Major Shift in Policy Setting?

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Positive US Data Ahead of Jackson Hole Summit 

The US index weakened during Wednesday’s trading closing just below 93.

Durable goods orders rose by 11.2% to $230 billion in July. This was an improvement on the revised June orders of $207 billion.

In addition, data from the CB showed that new home sales increased in July. The Bureau cited low-interest rates for the upbeat figures. 

The focus will shift to today’s Jackson Hole summit. Early reports indicate that Fed Chair Powell will request further stimulus from Washington. He is also expected to commit to low-interest rates until employment and inflation improve.

ECB Cautious Over Future of Low-Interest rates

The euro closed indecisively yesterday. However, it kept its stance above the 1.18 handle.

ECB official Isabel Schnabel warned of an increase in eurozone loan defaults. She also stated that there could be ‘side effects’ if the negative interest rate environment persists for too long.  

Investors Jump on Risk Sentiment

The pound traded towards the top of its August range. GBPUSD closed 1.07% higher on Wednesday, recording a high above $1.32.

The pair remained supported against the euro and the dollar. In addition, both Aussie and Kiwi outperformed the dollar.

As we head into the Jackson Hole summit, risk sentiment is expected to swing as central bankers consider new policy ideas.

Will the Jackson Hole Symposium Halt Equities?

US equities continued their progression,  hitting further record highs.

Nasdaq was the best performer, closing the session 1.73% higher. The S&P 500 ended Wednesday 1.02% higher, while the Dow closed the session marginally up.

The Fed is expected to outline a more flexible approach to policy on Thursday. This includes a shift to targeting an average inflation rate of around 2% that will allow rates to stay lower for longer.

US-China Relations Hit Another Low

Gold was spurred yesterday, closing over 1% higher after further US-Sino tensions.

China launched ballistic missiles into the South China sea amid broader military exercise. The missiles landed in a disputed region a day after Beijing protested a flyover by a US spy plane.   

A shift in risk appetite was notable as the yen fell against both the dollar and the euro.

$43 Now the Support for WTI?

WTI maintained its level above $43 as the EIA reported a larger than expected drop in oil stocks.

Hurricane Laura’s arrival towards the US Gulf led to refinery shutdowns. Oil prices were affected by the closures and this is likely to remain the case.

However, the impact is expected to be very short-lived as oil producers in the region are temporarily pausing their operations only for a few days.

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