The Conference Board Economic Forecast For The US Economy

Economic

Summary:

Recent financial market gyrations notwithstanding, the US is likely not on the cusp of recession.

GDP Growth to Slow, Not Plunge, in 2024

The economy is expected to lose momentum in H2 2024 as high prices and elevated interest rates sap domestic demand. Real GDP growth rose by an unexpected 2.8 percent quarterly annualized in Q2 2024 (from 1.4 percent in Q1 2024), led by stronger domestic demand and a surge in inventories. But there were some signs of weakness, especially as consumers dialed back on services spending, which has been a key contributor to real GDP growth over the last two years. Consumers and businesses are likely to continue cutting spending and investments ahead, suggesting economic growth decelerated to 0.6 percent annualized in Q3 2024.

Faster Activity Likely in 2025

GDP growth probably will be lackluster in Q4 2024, expanding at a tepid pace of about 1 percent annualized. The slightly faster pace relative to Q3 reflects some expectation that falling mortgage rates might stoke modest increases in home sales, and a cheaper US dollar supports slightly faster exports growth. However, growth should rise slightly above 2 percent by the end of 2025, reflecting achievement of the Fed’s 2-percent inflation target, and lower interest rates.

US Consumers Losing Steam

US consumer spending was robust in 2023 but was mixed in the first half of 2024 as pandemic savings ran dry, and high prices and interest rates drained wallets. Real consumer spending on durable goods collapsed in Q1 but rebounded in Q2, probably as costs for big ticket items like cars and furniture started falling in earnest. However, goods spending growth netted out to 0.2 percent annualized in H1. Nondurable goods consumption rose by just 0.3 percent annualized in H1. Meanwhile, services spending was strong in Q1 but slowed by a full percentage point in Q2, averaging about 2.8 percent in H1. Importantly, consumers are still spending, but their purchases are rotating towards cheaper and necessary goods and services. The Conference Board Consumer Confidence Survey suggests continued concerns among consumers about the future, portending further weakness in spending for the balance of 2024. Consumer spending may pick back up in 2025 as lower interest rates and inflation will grant consumers relief.

Household Debt a Threat to Consumption and Banks

Real consumer spending growth is still hovering slightly above real disposable personal income growth meaning some households continue to finance purchases with debt, as excess savings has evaporated. Consumer credit and debt service payments are still mounting, which combined with the high cost of living and elevated interest rates, may also curb expenditures on discretionary items. Auto loan and credit card delinquencies are above pre-pandemic levels and banks are suffering increasing losses on unpaid consumer debt.

Uncertainty and High Interest Rates Curbing Business Investment

Business investment growth remains uneven as the cost of capital is elevated, and businesses fret over slowing consumer demand, upcoming elections, and geopolitical concerns. Investment picked up in Q1 2024, but remained skewed towards intellectual property and Q2 investment was mostly fueled by a likely one-off spike in transportation equipment. The Conference Board Measure of CEO Confidence for Q3 revealed most CEOs of large firms do not anticipate a US recession but are still only cautiously optimistic. Investment plans in the CEO survey were also for the most part unchanged: if cuts were in tow, then they will happen, or if spending is in the future, then it will happen.

More Shade Than Bright Spots in Business Investment Outlook

Businesses are investing in intellectual property (e.g., digital transformation, AI) and talent, but not in capital equipment and structures apart from factories. Industrial policies encouraging infrastructure improvement and onshoring of supply chains are bolstering manufacturing facility construction and road repairs, but not much investment in other commercial structures. Meanwhile, the collapse of CRE prices, due to the troubled office space market, likely is also weighing on business investment in structures. As such, anemic capex probably will continue over the balance of 2024. However, The Conference Board Measure of CEO Confidence survey revealed that CEOs of large firms do expect that both the economy and their industries will improve over the course of the next six months. This sentiment, along with lower interest rates may support increased investment later in 2025.

Hope on the Horizon for Residential Investment

As expected, residential investment fell in Q2 2024, but may pick up over the balance of 2024. Despite the need for more housing, high interest rates, elevated materials costs, labor shortages in the construction industry, and sky-high home prices, are weighing on residential investment. However, after the Fed signaled that interest rate cuts may commence as soon as September, mortgage rates have started to fall. Home prices across most of the country are elevated, but lower mortgage rates may entice some buyers and sellers back into the market and support somewhat more housing construction. This modest revival might even start in late Q3 2024.

Government Spending Likely Has More Room to Run

Government spending was a positive contributor to economic growth in 2023 due to federal non-defense spending associated with infrastructure, R&D, chips, and energy transition preparedness legislation passed in 2021 and 2022. The contribution from government spending was smaller in Q1 2024 but bounced back in Q2 2024. We project that outlays associated with these government policies should continue to support GDP growth this year and next, but with lessening intensity. Still, political volatility relating to budgets, debt, taxes, and outlays could dampen government spending ahead, and possibly even result in the repeal of key aspects of the legislation that boosted real GDP growth over the last few years.

Trade and Inventory Contributions Remain Wildcards

Net exports were a significant drag on real GDP growth in the first half of 2024, while inventories fell in Q1 but then spiked in Q2. Although exports have been positive, imports have been outsized. The negative contribution from external trade may lessen going forward as a somewhat weaker US dollar may boost shipments abroad and weaker domestic demand curbs imports. Nonetheless, both trade and inventories remain wildcards regarding their respective contributions to GDP as firms continue to struggle to manage stockpiles amid constantly shifting domestic and international demand.

Labor Market Downshifting, Not Collapsing

The labor market is cooling, but from after outsized growth that was necessary for restoring employment post-pandemic. Nonfarm payrolls slowed to 114,000 in July after increasing by 168,000 on average in Q2, 267,000 in Q1 2024, and 251,000 in 2023. The unemployment rate also ticked up to 4.3 percent in July. Still both we and the Fed judge that the labor market remains relatively healthy. The unemployment rate is quite low historically speaking, and as many industries have rehired workers let go during the pandemic, it makes sense that payroll gains need not be exceptionally large. Additionally, labor shortages are continuing to drive hiring in key industries as Baby Boomers retire and front-line and manual worker jobs remain hard to fill. The labor market probably will continue to moderate, but not collapse as large US firms continue to hoard workers and small firms indicate that they plan to continue hire. While these dynamics are keeping many people employed, labor market churn associated with labor shortages continue to keep wages and benefits elevated – costs many firms are passing onto consumers.

Inflation Back on Track But Not On Target

Demand-driven Inflation Easing

Consumer price inflation resumed cooling in Q2 2024 after stalling in Q1 2024. Initial data for July suggest that the slowing continued at the start of Q3. Still, the Personal Consumption Expenditure (PCE) deflator inflation remains above the Fed’s 2-percent target. Goods inflation is not the problem: nondurable goods inflation (e.g., food, gasoline) continues to rise on a year-over-year basis but is being offset by falling prices for durable goods like motor vehicles, RVs, and furniture. Hence, most inflationary pressures are from services prices. Slowing shelter cost inflation, consistent with past easing in rent and home price inflation as interest rates rose and sapped housing demand, is helping to moderate services price inflation.

Supply-driven Inflation Cooperating Less

However, progress back to the Fed’s inflation target continues to be challenged by supply-side factors and structural changes that are outside of its control. Elevated labor costs from sticky wages amid labor shortages, continue to raise prices for in-person services like restaurants and healthcare. More high-tech cars, some outfitted with AI, are raising the cost of motor vehicle insurance. Repeated and costly natural disasters are prompting insurance companies to raise premiums on home insurance. Financial services costs in general are rising and health care insurance costs continue to levitate. Some of these pressures are beginning to subside. However, given the tug-of-war between supply- and demand-drivers of inflation, we still project PCE inflation will stabilize at 2 percent by mid-2025.

Expect Rate Cuts to Start in September

Given this outlook, the Fed will likely start cutting interest rates in September, and continue cutting each meeting until Q3 2025. If the Fed reduces rates by 25 basis points per meeting, the fed funds rate would fall by 75 basis points by end-2024 and by another 150 basis points by end-2025 to just above 3 percent. The magnitude of individual actions and the pacing of such could be altered by the realization of either upside or downside risks to the economy. Stubborn inflation, and stronger-than-expected GDP or labor market data might cause the Fed to be more judicious and pause often to assess the effect of its actions. Much cooler inflation and material weakness in growth or labor market might cause the Fed to cut rates in larger increments per meeting.

Potential Bumps in the Fed’s Path

Any political pressures to cut interest rates ahead of the upcoming US election in November will have no bearing on the Fed’s decisions, given its independence and focus on monetary policy. However, political events that threaten the economy or cause extreme financial market volatility, including election-related social unrest, federal budget impasses, and/or congressional failure to address the debt ceiling in early 2025, could also affect the timing and extent of interest rate cuts ahead. The Fed might cut rates one or two times and then pause to wait out any turbulence. Indeed, the step-down in monetary policy rates could be protracted and end with higher rates than pre-pandemic averages: the federal funds rate average between the 2008-09 Great Recession and the 2020 pandemic was about 1.5 percent in nominal terms and -0.5 percent in real terms.

Two-sided Risks to the US Outlook

Risks to the US outlook remain two-sided, and slightly tilted downward

Downside risks include geopolitical concerns that might result in spikes in food or energy price inflation, disruptions in critical minerals or semiconductor supply chains, and/or trade wars. Domestic fiscal policy poses risks from uncertainty following the election, a 2025 debt ceiling episode, and the expiry of the Tax Cuts and Jobs Act in 2025. Related to the tax cuts expiry, higher taxes for individuals would reduce consumption and negatively affect companies catering to consumers in the short run. Extending the tax cuts or rendering them permanent would increase federal government deficits and debt over the long run. Additionally, if consumer spending slows too aggressively near-term, companies not suffering from labor shortages may start laying off workers, which might push the US into recession.

On the upside, consumers continue to surprise observers with their elevated levels of spending. Despite the depletion of excess savings and debt accumulation, households may maintain a higher level of consumption than expected. There could also be a surge in housing activity and business investment as the Fed cuts rates. There could also be additional federal government spending to bolster high growth areas of the economy. Such business investment and government spending could bolster productivity. Moreover, advances in technology, especially fuller adoption of existing and future forms of AI might also bolster productivity.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Warren Takunda

Cryptocurrency

Bitcoin has been lacking momentum this week as BTC price predictions increasingly see the market heading lower.

After a promising weekend turned sour into the weekly close, BTC/USD Is offering little inspiration to traders already tired of rangebound moves.

The sentiment is sour, and while stocks have recovered from their flash crash at the start of August, crypto has yet to do likewise.

What could shake things up?

The United States Federal Reserve is in the spotlight this week as its annual Jackson Hole symposium comes around.

Chair Jerome Powell will address the current macroeconomic state of play as traders hope for a clear signal regarding interest rate cuts next month.

That could set up a volatile end to the week, but in the meantime, concerns are increasing that Bitcoin may lead crypto into another leg down.

$50,000 is in play, analysis warns, and while miners are staying cool, a sense of angst lingers over the market.

Cointelegraph takes a closer look at the key crypto talking points among traders as August grinds on with seemingly no new all-time highs in sight.

No talk of BTC price upside

Bitcoin gave up its weekend gains into the Aug. 18 weekly close — an all-too-familiar sequence of events for traders, who traditionally caution over “out of hours” market moves.

The Asia trading session nonetheless offered little hope to bulls, with BTC/USD trading at around $58,650 at the time of writing, per data from Cointelegraph Markets Pro and TradingView. A Return to $50K? 5 Things to Know in Bitcoin This Week_1

A Return to $50K? 5 Things to Know in Bitcoin This Week_1

BTC/USD 1-hour chart. Source: TradingView

Devoid of a significant trend, BTC price action thus frustrated commentators.

“Boring weekend, price would probably chop for another week before we get any big moves,” popular trading account Logical TA wrote in part of its latest market coverage on X.

“$BTC has chopped for the last 160-170 days, this is more painful than a bear market.”

BTC/USDT 1-day chart. Source: Logical TA/X

Fellow trader Roman agreed while seeing the potential for a return to the area around $55,000.

“Slowly but surely making our way to 55k support. Will look for longs at that point. I’ve kept my thoughts the same for the last 2 weeks as the original uptrend was weak,” he told X followers.

Roman added that the Bollinger Bands volatility indicator needed to deliver an advance signal that the market was primed for a breakout in a given direction.

Analyzing both long and short-timeframe targets, meanwhile, trader CrypNuevo saw a “buying opportunity” closer to $50,000. A Return to $50K? 5 Things to Know in Bitcoin This Week_3

A Return to $50K? 5 Things to Know in Bitcoin This Week_3

BTC/USDT 1-day chart. Source: CrypNuevo/X

“$53.6k and $51.5k are two potential levels that price will go to in order to fill those wicks in 1W & 1D time frames,” part of an X thread explained.

“So if you missed this move, you could likely be able to buy back at those levels again.”

CrypNuevo warned of a potential “fakeout” to the upside before price returns lower over the coming days.

“Most retail will be paying attention to and trading this channel; thus, we could see some manipulation from the Market Maker here,” he explained alongside an illustrative chart.

“We could see a fake-out above it at the start of the week to then drop to that new wick at $56k.”

BTC/USDT 4-hour chart. Source: CrypNuevo/X

Markets await Powell's Jackson Hole appearance

This week, risk-asset traders are focused on the US Federal Reserve’s Jackson Hole symposium as markets demand cues on handling inflation.

The annual event will feature a speech from Fed Chair Jerome Powell on Aug. 23, and market observers will be keenly analyzing his language for confirmation of future policy easing.

Just weeks after the flash equities crash originating in Japan, markets are on edge — the Fed, they believe, will have no choice but to cut interest rates at its next meeting in September.

The latest data from CME Group’s FedWatch Tool maintains a 100% chance of a cut occurring in some form, with 71.5% odds of this coming in at 25 basis points. A Return to $50K? 5 Things to Know in Bitcoin This Week_5

A Return to $50K? 5 Things to Know in Bitcoin This Week_5

Fed target rate probabilities. Source: CME Group

Commenting on the current landscape, trading resource The Kobeissi Letter acknowledged stocks’ impressive comeback since the Japan shock. As Cointelegraph reported, Japan’s Nikkei 225 required just days to erase what was its biggest two-day decline in history.

“The S&P 500 is now just 2% away from a new all time high,” it noted in an X thread.

“Markets have gone from entering correction territory to eying new all time highs in just days.”

S&P 500 1-day chart. Source: TradingView

Continuing, CrypNuevo forecast what he called a “very interesting week of year.”

“It's an event attended by central bank leaders from around the world and it usually brings volatility,” he told X followers.

“This year, Powell will speak about the upcoming rate cuts. Hot take: Powell could say that ‘50bps cut in September is not on the table atm.’”

Bitcoin miners halt wallet outflows

Optimism surrounding Bitcoin miners continues this week as one on-chain metric shows BTC sales cooling.

In one of its Quicktake blog posts on Aug. 19, onchain analytics platform CryptoQuant showed the BTC reserves in known miner wallets beginning to stabilize.

“Miners have been selling their Bitcoins through over-the-counter transactions and exchanges until recently, but since the end of July, they have shown no signs of selling,” contributor Crypto Dan summarized.

Despite the recent significant price drawdown, miners have not yet been forced to reassess profitability despite their production cost per bitcoin being close to current spot price.

“Miners Reserves are now at January 2021 levels,” popular crypto commentator MartyParty added about the CryptoQuant data.

“The miner sell off appears complete.”

Bitcoin miner BTC reserves. Source: CryptoQuant

Miner reserves stood at 1.814 million BTC as of Aug. 18, down around 25,000 BTC since the start of the year.

Crypto Dan meanwhile was not wholly convinced that the landscape would remain stable going forward.

“Although one indicator shows only a positive aspect, considering that miners are whales and their movements always create large market fluctuations, I think it is worth watching the market for a while longer,” he concluded.

BTC market dominance falters

Bitcoin’s share of the total crypto market cap has seen its latest macro peak, traders say.

Having hit nearly 58% earlier this month, Bitcoin dominance is wavering — and ultimately, altcoins should benefit. A Return to $50K? 5 Things to Know in Bitcoin This Week_8

A Return to $50K? 5 Things to Know in Bitcoin This Week_8

Bitcoin market cap dominance 1-day chart. Source: TradingView

“Bitcoin dominance on its final wave of completion,” popular trader Mikybull Crypto announced on X on Aug. 19, predicting a “big crash” in the index to ignite an altcoin renaissance in Q4.

An accompanying chart employed Elliott Wave theory to suggest a return back below the 50% mark for dominance, which currently stands at around 57%.

A Return to $50K? 5 Things to Know in Bitcoin This Week_9

Bitcoin market cap dominance chart. Source: Mikybull Crypto/X

Michaël van de Poppe, founder and CEO of trading firm MNTrading, likewise predicted the “end of the bear market” for altcoins.

A Return to $50K? 5 Things to Know in Bitcoin This Week_10

Bitcoin market cap dominance 2-week chart. Source: Michaël van de Poppe/X

“Real alt szn begins when BTC.D breaks beneath 50%,” fellow trader Kaleo continued last week in an X thread on the topic.

Kaleo concluded that he was “fairly confident” in the macro top being in for dominance.

"Bearish sentiment" with trend line out of reach

Bitcoin sentiment is firmly “bearish” thanks to price returning below a key long-term trend line, some of the latest analysis concludes.

CryptoQuant contributor Axel Adler Jr. sees problems potentially arising due to BTC/USD giving up its 200-day simple moving average (SMA), currently at $62,750.

“BTC price is trading below the 200-day SMA, which formally indicates a bearish sentiment,” he wrote on X. A Return to $50K? 5 Things to Know in Bitcoin This Week_11

A Return to $50K? 5 Things to Know in Bitcoin This Week_11

BTC/USD 1-day chart with 200SMA. Source: TradingView

Adler uploaded CryptoQuant data showing use of leverage on exchanges, this spiking to its highest levels since the Japan meltdown.

“Additionally, in recent days, increased leverage has been used on the top three exchanges,” he warned.

“The nearest support level is the 365-day SMA ($50K).”

Bitcoin adjusted estimated leverage ratio. Source: Axel Adler Jr./X

The latest data from the Crypto Fear & Greed Index meanwhile puts the average mood among crypto investors as just three points off “extreme fear,” measuring 28/100. A Return to $50K? 5 Things to Know in Bitcoin This Week_13

A Return to $50K? 5 Things to Know in Bitcoin This Week_13

Crypto Fear & Greed Index (screenshot). Source: Alternative.me

Source: Cointelegraph

Risk Warnings and Disclaimers

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IFO

Data Interpretation

Economic

The ifo Business Climate in German retail noticeably deteriorated in July, according to the latest ifo Institute surveys. The indicator fell to -25.4 points, down from -19.5 in June. Retailers are significantly more guarded about their current business situation. Their expectations for the coming months have clouded over further. “That makes a significant upturn in retail business in the second half of the year less likely,” says ifo expert Patrick Höppner.

Retailers of bicycles, electrical goods, and electronic household appliances, and drugstores report unfavorable business development. Food retailers and car sellers were also less satisfied. Sellers of bicycles, clothing, furniture, and furnishings assess their business situation as particularly tense.

For the second quarter of 2024, 54.1% of retailers reported insufficient demand. 46.2% had to contend with less foot traffic. The shortage of skilled workers was felt by 32.1%. “There is a lack of skilled workers, even though retailers are currently planning to cut their overall staffing needs,” says Höppner. 6.1% of retailers reported financing difficulties.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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S&P Global Inc.

Data Interpretation

Economic

Fed minutes, Jackson Hole, August flash PMI surveys

More insights into whether the Fed will cut interest rates in September will be provided via both July's Federal Open Market Committee (FOMC) meeting minutes and the Jackson Hole symposium in the week. This is especially with the July US CPI release having mirrored the recent PMI price trend in showing easing inflationary pressures, thereby building anticipation for the Fed to cut rates soon. As far as US equity investors are concerned, positive sentiment has risen surrounding central bank policy being a positive contributor to market returns. This is according to the latest August S&P Global Investment Manager Index.

Flash PMI data for August will meanwhile be released on Thursday for the earliest insights into economic conditions. These early economic signals will also be crucial inputs to guide policy ahead of the September FOMC meeting, especially on the prices front for the US. Central bankers across the US and Europe will likely be keen to see that rising cost pressures in July have not translated to higher selling prices that could threaten hopes for rate cuts.

Eurozone inflation data will be eagerly awaited as economists assess the potential for further rate cuts from the ECB. Other economies releasing inflation data include Canada, Japan, Hong Kong SAR, Singapore and Malaysia, with Canada and Japan notably in the spotlight in relation to monetary policy decisions after the Bank of Japan recently raised interest rates and the Bank of Canda reduced its policy rate. Other tier-1 data due in the week include GDP data from Mexico and also Thailand.

Several central bank meetings also take place in the week in Turkey, South Korea, Thailand and Indonesia, though no changes to interest rates are expected across the APAC central banks. Insights on when rate cuts will commence will nevertheless be sought from these meetings.

UK economy retains robust growth momentum

Official data confirmed recent upbeat survey evidence, indicating that the UK economy is faring well in 2024. Gross domestic product rose 0.6% in the second quarter, according to initial estimates form the Office for National Statistics, building on a solid 0.7% gain in the first three months of the year.

Further growth is anticipated for the second half of the year, though most economists - including those at the Bank of England - are expecting the pace of expansion to cool. This slowing in part reflects base effects, as the first half of the year has seen the economy rebound from a mild technical recession in the second half of 2023.

However, survey data suggest that the underlying pace of growth has remained robust into July, suggesting that any slowdown in the third quarter GDP numbers should not be overly concerning. The PMI's headline index tracking output in the manufacturing, services and construction sectors registered 53.1 in July, in line with the average seen in the second quarter. At this level, the PMI is broadly indicative of the UK economy growing at a quarterly pace approaching 0.3%.

Note also that the PMI data show the UK outperforming all other major developed economies bar the US, registering in particular a marked outperformance of manufacturing. Only India and Thailand reported faster manufacturing growth than the UK in July, according to S&P Global's PMI surveys.

Further clues of the UK's third quarter performance will be provided by the upcoming flash PMI data for August.

What to watch in the coming week

August flash PMI data due Thursday

Flash PMI data for August will be released across major developed economies including the US, UK, Eurozone, Japan and Australia, in addition to India. Growth conditions will be observed, especially to see whether service sector gains can continue to help offset a weakening manufacturing picture, after July PMI data pointed to global manufacturing falling into decline.

Americas: Fed minutes, Jackson Hole Symposium, Canada inflation, house prices

Minutes from the end-July Federal Open Market Committee (FOMC) meeting will be published midweek for detailed insights into the Fed's thoughts amid high expectations for a September rate cut. Additionally, Fed appearances at the Jackson Hole Symposium will also be viewed as an additional opportunity for US central bankers to telegraph their intentions for rates. The comments will be watched in conjunction with the release of August flash PMI, offering the earliest insights into output and price trends in the US.

Over in Canada, July's inflation figures will be updated on Tuesday with S&P Global Canada PMI data having alluded to higher, but still modest increases in selling prices in July.

EMEA: Eurozone inflation, consumer confidence, Germany PPI, TCMB meeting

The data highlight of the week for Europe will be flash PMI updates for August, shedding light on the latest growth and inflation developments across sectors.

Besides which, the final July print for eurozone inflation will be due at the start of the week. Flash August consumer confidence data will also provide insights into European consumer morale for a comparison with business sentiment available via the PMI Future Output Index.

APAC: RBA minutes, China Loan Prime Rate, BoK, BoT, BI meetings, Japan trade, Thailand GDP, Japan, Hong Kong SAR, Singapore, Malaysia inflation

Central bank meetings in South Korea, Thailand and Indonesia are set to unfold in the new week, while the Reserve Bank of Australia releases August meeting minutes. The Bank of Korea, Bank of Thailand and Bank Indonesia are broadly expected to maintain the status quo regarding monetary policy settings in their upcoming meetings, with potential rate cuts likely due only later in the year.

On the data front, Japan releases inflation and trade data, with the former watched for any signs of rising price pressure after the latest au Jibun Bank Japan Composite PMI pointed to slightly higher selling price inflation. Inflation data will also be due from Hong Kong SAR, Singapore and Malaysia while second quarter GDP will be updated for Thailand.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Warren Takunda

Stocks

Asian stocks edged up and the dollar slid on Monday after global equities enjoyed their best week in nine months on expectations the U.S. economy would dodge a recession and cooling inflation would kick off a cycle of interest rate cuts.

The prospect of lower borrowing costs saw gold clear $2,500 an ounce for the first time and the dollar dip against the euro, while the yen made a sudden lunge higher that weighed on the Nikkei.

Federal Reserve members Mary Daly and Austan Goolsbee were out over the weekend to flag the possibility of easing in September, while minutes of the last policy meeting due this week should underline the dovish outlook.

Fed Chair Jerome Powell speaks in Jackson Hole on Friday and investors assume he will acknowledge the case for a cut.

"Although it may be too early to declare victory - and central bankers will certainly be prudent to avoid this in their official rhetoric - the inflation scare that had dominated the policy debate since prices started to soar during the pandemic has now largely vanished," said Barclays economist Christian Keller.

"Inflation may not be quite at the 2% target yet, but it is close and going in the right direction."

Futures are fully priced for a quarter-point move, and imply a 25% chance of 50 basis points with much depending on what the next payrolls report shows.

Analysts at Goldman Sachs cautioned that annual benchmark revisions to the jobs series are due on Wednesday which could see a large downward revision of between 600,000 and one million positions, though this would likely overstate the weakness of the labour market.

For now, the expectation of a softer than soft landing for the U.S. economy has S&P 500 futures up 0.2% and Nasdaq futures ahead by 0.3%, on top of last week's gains.

EUROSTOXX 50 futures added 0.2% and FTSE futures eased 0.1%.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 1.0%, having rallied 2.8% last week.

Japan's Nikkei fell 1.2% as the yen rose, though that followed a near 9% bounce last week. Chinese blue chips firmed 0.4%.

The Fed is hardly alone in contemplating looser policy, with Sweden's central bank expected to cut rates this week, and possibly by an outsized 50 basis points.

In currency markets, the dollar lapsed 1.0% to 146.20 yen , and further away from last week's top of 149.40. The euro firmed to $1.1030 , just below last week's peak of $1.1047.

"The overall Fed message this week is likely to reassure market participants looking for confirmation that policy rate cuts are now imminent," said Jonas Goltermann, deputy chief markets economist at Capital Economics.

"As such, the greenback may well remain under pressure in the near term, although given the extent to which Fed easing is already discounted, we doubt there is that much further dollar weakness in store."

A softer dollar combined with lower bond yields to help gold hold at $2,500 an ounce , and near an all-time peak of $2,509.69.

Oil prices dipped again as concerns about Chinese demand continued to weigh on sentiment.

Brent fell 11 cents to $79.57 a barrel, while U.S. crude lost 20 cents to $76.45 per barrel.

Source: Reuters

Risk Warnings and Disclaimers

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FxPro

Cryptocurrency

Market Picture

On Monday morning, the crypto market capitalisation stood at $2.07 trillion, up slightly from $2.05 trillion a week earlier. In the previous two weeks, the market failed to rally above the $2.15 trillion level, which has become a local resistance. The weakness in the crypto market undermines our confidence in a global recovery in risk appetite, even though last week was the strongest week for US equity indices in many months.

Crypto Market Attracts Money, But Prices Don’t Rise_1

Interestingly, the sell-off from local resistance in the crypto market over the past two weeks has been accompanied by a surge in stablecoin capitalisation to new records after a prolonged sideways period from April to the end of July. Typically, the growth in stablecoin volume coincides with the bullish phase of the market. The crypto whales buy on dips, and it is clear from Bitcoin’s dominant dynamics that their focus remains on the first cryptocurrency, whose market share has risen to 56.5% – the highest since April 2021.

Crypto Market Attracts Money, But Prices Don’t Rise_2

Litecoin’s dynamics illustrate what is happening in cryptos, except for the largest coins. Again, it’s mostly selling on growth. Litecoin fell sharply below its 50-day moving average in April and has been selling off on approaches to this line for the past four months. On Sunday, this downtrend touched again at around $67. An intensification of the negative trends could send the price to $56 (the area of the previous uptrend reversal) or even trigger a major liquidation with a slip below $50.

Crypto Market Attracts Money, But Prices Don’t Rise_3

News background

According to SoSoValue, the spot bitcoin-ETFs saw modest total inflows of $32.6 million last week after two weeks of outflows. In contrast, the Ethereum-ETF saw net outflows of $14.2 million last week, with net outflows of $0.42 billion since the products were approved, compared to $17.37 billion for Bitcoin ETFs.

According to Bitcoin Magazine, nearly 75% of all Bitcoins in circulation have been inactive for more than six months, reflecting a hoarding trend. Factor LLC CEO Peter Brandt said Ethereum on the four-hour chart is ‘signalling’ a possible drop to $2,000 or even lower.

Bernstein gave shares of mining companies Riot Platforms, CleanSpark, IREN and Core Scientific an Outperform rating on the market. The IMF proposed an 85% increase in energy tariffs for bitcoin miners globally, which could significantly reduce carbon emissions.

Artificial intelligence-related crypto projects could fail due to the potential ‘collapse of the bubble’ in the sector, according to Blockcircle. AI in cryptocurrency is ‘largely fashionable,’ although there has been little real-world application of neural networks in the crypto sphere.

The absence of US Democratic presidential candidate Kamala Harris from the Crypto for Harris event has led the community to question her support for the crypto industry.

Chainalysis noted that attackers stole cryptos worth nearly $1.6 billion in the first half of the year, increasingly targeting centralised exchanges (CEX). The figure nearly doubled compared to the same period in 2023.

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Sterling recovered further from the depths of its early August lows around 1.16 against the Euro last week, regaining its 200-day moving average at 1.1692 before moving on to test the 100-day average at 1.1747.

Its recovery has been helped by economic data highlighting a resilient labour market, more moderate than expected inflation pressures for July and a continued robust expansion of the economy for last quarter.

Financial market pricing has continued to imply as a result that the Bank of England is likely to be cautious and slow-moving in relation to interest rate cuts in the months ahead, with current pricing implying that the UK is likely to have the second highest interest rate in the G10 group of economies come year-end.

“The still higher yields on offer in the UK and stronger cyclical momentum for the UK economy remain supportive for the GBP,” MUFG analysts said in a Friday note.

Pound to Euro Week Ahead Forecast: Eroding Resistance on Charts_1

Above: Pound to Euro rate shown at daily intervals with 100-day moving average (orange) indicating possible areas of technical resistance, while Fibonacci retracements of November recovery and 200-day average (blue) denote prospective areas of support.

There is little meaningful data in the economic calendar to guide Sterling or the Euro one way or the other ahead of Thursday’s S&P Global PMI surveys of the manufacturing and services sectors in the UK and Europe.

The author’s model suggests a narrow trading range spanning the gap between 1.1702 and 1.1754 is likely in the days ahead, which implies that the nearby 100-day moving average at 1.1747 may be likely to offer some resistance to the recovery in GBP/EUR in the absence of a catalyst for a break higher.

This catalyst may or may not come with the S&P PMI surveys out on Thursday, or the speech from Bank of England Governor Andrew Bailey at the Federal Reserve’s Jackson Hole Symposium at 20:00 on Friday. The consensus currently looks for both UK and European PMI indices to ebb modestly for August.

“Despite the recent sell-off, GBP remains the best performing currency in G10 year-to-date,” BofA Global Research strategists said in a note to clients last Thursday.

“The fundamental/secular positives remain the same and we are reassured that recent weakness has not been a reflection on the UK macro-outlook,” they added.

Pound to Euro Week Ahead Forecast: Eroding Resistance on Charts_2

Above: Quantitative model estimates of possible ranges for the week. Source: Pound Sterling Live.

Source: Poundsterlinglive

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Pound to Euro Week Ahead Forecast: Eroding Resistance on Charts

Above: Pound to Euro rate shown at daily intervals with 100-day moving average (orange) indicating possible areas of technical resistance, while Fibonacci retracements of November recovery and 200-day average (blue) denote prospective areas of support.

Above: Quantitative model estimates of possible ranges for the week. Source: Pound Sterling Live.

Source: Poundsterlinglive

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