Inflation in Europe was released better than the forecast. The preliminary fact was published at 4.3%. What's happening in the markets?
What to Trade on August 22–26?
How Energy Crisis Affects German PMI
August 23, 2022, 10:30 GMT+3
Germany will publish Flash Manufacturing PMI data on Tuesday, August 23, at 10:30 MT time (GMT+3). It's a leading indicator of economic health since businesses react quickly to market conditions, and purchasing managers hold the most current and relevant insight into the company's view of the economy.
The index has been sliding since February 2022, when Germany imposed sanctions against Russia in response to the military conflict in Ukraine. As a result, Germany gets half as much gas from Russia as it used to, and gas prices reach new highs in Europe, provoking a severe energy crisis. The situation affects businesses and slows down their growth, sending PMI lower.
Last time German Flash Manufacturing PMI was 49.2, underperforming the expected 50.6. The EURUSD had lost around 350 points. Let's wait and see how it will react this time.
- If the actual number is higher than expected, EUR will rise.
- Otherwise, EUR will fall.
Instruments to trade: EURUSD, EURCAD, EURJPY.
Jackson Hole Symposium
August 25-27, 2022.
The Economic Policy Symposium, held in Jackson Hole, is attended by central bankers, finance ministers, academics, and financial market participants worldwide. The influential officials’ comments usually create significant market volatility.
Investors and traders will follow Jerome Powell’s speech with particular interest, who will most likely talk about quantitative tightening, also known as balance sheet normalization. It’s the process of central banks selling their accumulated assets (mainly bonds) to reduce the supply of money circulating in the economy.
- If Jerome Powell makes hawkish statements regarding the future monetary policy, the US dollar will strengthen.
- However, if Jerome Powell highlights the inflation slowdown and makes dovish statements, USD will drop.
Instruments to trade: EURUSD, USDCAD, USDJPY.
Core PCE Price Index m/m
August 26, 2022, 15:30 GMT+3
The United States will publish Core PCE price index m/m data on Friday, August 26, at 15:30 MT. The index is the Federal Reserve's primary inflation measure as it only counts goods and services consumed by individuals.
Despite the CPI growth slowdown in July, the topic is the hottest as inflation remains at a historic high. Investors and traders will use this data to predict the next Federal Reserve steps. Will the Fed increase the rate by another 75 basis points, or will it be only a 50-basis-points rate hike this time? The release will give precise hints about this.
Last time Core PCE price index was 0.6%, outperforming the expected 0.5%. USDCHF gained 250 points right after the release but lost 600 points in the next two hours.
- If the Core PCE price index is higher than expectations, the USD will rise.
- If the Core PCE price index is lower than expectations, the USD will fall.
Instruments to trade: EURUSD, USDCAD, USDCHF.
What else to watch?
All traders and investors are watching US500 closely. The price reversed from the cross point of the descending trendline and the 200-day moving average. Will sellers drug the price below 4180? We will discover it soon!
If the price stays above this support, it might go towards 4300.
In case of a breakout, sellers might pull US500 to 3900.
Instruments to trade: US500.
Trading on the market events is a great chance to see how the price reacts to the releases. Next week will be significant for the US stock market and the US dollar.
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Welcome to the first week of October! As usual, at the start of the week, we are looking for valuable insights that will bring us profits in trading. Let’s observe the main events.