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28/08/2023 - 07:42 UTCThe U.S dollar ticked slightly higher against most of its peers on Friday, with the USDX ending the week 0.74% higher, closing a sixth consecutive week in the positive. Against the TRY, the greenback seems to be losing ground following a long period of stability, with the USD/TRY pair ending last week 2.09% lower.
Energy prices fluctuated between gains and losses in the past week, with WTI finally ending the week lower by 1.53% while Brent was closed the week with a mere 0.02% decline. Some pressure in the sector could have derived from Powell’s latest comments indicating the Federal Reserve wasn’t done with rate hikes to bring U.S. inflation under control.
In China, new measures that lower stock trading costs were announced during the weekend to attract investors back into the markets. In addition, Chinese exchanges were seen lowering their margin requirements, something that made Chinese indices recover from recently reached yearly lows.
A mixed picture was seen in the main US stock indices last week, following some hawkish fundamentals such as rising bond yields and comments from the Federal Reserve's Jerome Powell that signalled further rates hikes are still on the table to combat inflation. The US 500 was up by 0.70%, the US 30 was down by 0.57% and the US tech 100 was seen 1.56% higher. In his Jackson Hole speech Friday, Powell said that to bring inflation back to target it is expected to “require a period of below trend economic growth as well as some softening and labor market conditions.
With no major catalysts driving markets on Monday, attention could possibly shift to key US reports due later this week, including among others the CB Consumer Confidence and JOLTS Job openings, Preliminary GDP and Pending home sales, the Fed’s favourite inflation gauge, the monthly Core PCE Price Index and finally the Non-Farm Payrolls report.
The EUR/USD pair traded between gains and losses on Friday but managed to end the session 0.03% higher after a high volatile session as the Federal Reserve Chare Jerome Powell warned that inflation remains too high in his Jackson Hole speech.
US Fed Chair Jerome Powel commented that the central bank is prepared to hike rates further, if appropriate, until inflation moves “sustainable down to 2%.” Elsewhere, the softer prints of the US Purchasing Managers Index and Michigan Consumer Sentiment Index contrasted with mixed details of Durable Goods Orders, mid-tier activity data and inflation expectations.
President Christine Lagarde flagged the need to set interest rates sufficiently restrictive for as long as necessary to achieve a timely return of inflation to the 2% medium-term target. ECB’s Lagarde also added that the fight against inflation "is not yet won."
Gold prices fell on Friday after the Federal Reserve Chair Jerome Powell left the door open to more interest rate hikes. Gold prices fell 0.08% at the end of the session but in a weekly basis gold gained 1.32% after four consecutive weeks posting losses.
Powell said on Firday that policymakers should proceed carefully but at the same time he made it clear that the central bank has not yet concluded that is benchmark interest rate is high enough to be sure inflation will return to the target of 2%.
Oil prices rose on Firday for a second day in a row but the gains werent enough to cover losses from earlier in the week. The WTI contract ended the session on Friday 1.41% higher but posted weekly losses of 1.53%.
Supply cuts from OPEC+ continue to support oil prices but the sluggish recovery in China and the uncertainty over the global economic outlook weighs on oil rices.
The Fed chief made clear that U.S. rates will follow inflationary pressure. Higher interest rates can slow economic growth and reduce oil demand. A stronger dollar can also slow demand by making oil more expensive for holders of other currencies.
U.S. stocks were higher after the close on Friday, as gains in the Consumer Goods, Oil & Gas and Industrials sectors led shares higher.US main indexes posted moderate gains on Friday with US 500 and US 300 ending the session 0.60% and 0.62% higher respectively while US Tech 100 posted gains of 0.84%.
In his Jackson Hole speech Friday, Powell said “restrictive” monetary policy is called for to achieve the Fed’s 2% inflation target. But at the same time, Powell noted that economic uncertainty called for "agile" monetary policy making, and that the Fed will proceed "carefully" when deciding its next policy move.
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