What are the main events for today?
EUROPEAN SESSION
In the European session, we get the Flash PMIs for the major Eurozone economies and the UK. Pretty much all of them are expected to pull back from prior month’s levels given the ongoing Hormuz disruption and US-Iran stalemate.
The data won’t change anything for the respective central banks, though, so the market reaction will likely be muted. Right now, the market is more focused on the Treasury “intervention" plan trying to limit the surge in long-term yields.
This has eased financial conditions at a time when oil prices continue to slowly edge higher. If we look at inflation expectations via US breakeven rates, the momentum to the upside increased, which has been the main driver of the surge in precious metals and the selloff in the US dollar.
AMERICAN SESSION
In the American session, we have the US Flash PMIs which are also expected to tick a bit lower. Unless we get big deviations, the data is unlikely to matter much at this point as traders await the Jackson Hole speech and the next NFP and CPI reports in September.
To sum up, we have a US-Iran stalemate keeping oil prices supported and adding inflationary pressures. We have the US Treasury that restricted the tightening in financial conditions which were helping limiting the inflation shock. We have the Fed which is expected to hold rates steady in September and, all else being equal, support the passive easing in financial conditions for a couple of months more.
If Warsh doesn’t address this in his Jackson Hole speech, expect precious metals to surge much further…
This article was written by Giuseppe Dellamotta at investinglive.com.