Daily Report 23/08/2018

Overnight, the minutes of the August US central bank policy meeting contained few surprises. They confirmed the likelihood of a September US interest rate hike, while also noting that rates may be getting close to the “neutral” level. UK Brexit Secretary Dominic Raab claimed that leaving the EU without a deal was “unlikely”. Nevertheless his department today will publish around 20 ‘technical’ notes on the consequences of a ‘no deal’ outcome, with more to come.

Today has the busiest economic data calendar of the week. The August Eurozone PMIs will be watched for evidence of activity in the region picking up. So far this year European economic growth has disappointed and the July PMIs painted a mixed picture, with the manufacturing index up but the services measure down – so the composite indicator was  modestly lower than in June. However, the August German ZEW survey was upbeat, showing a rise in both current conditions and expectations. Many expect the Eurozone PMIs to have also posted rises in August.

The expected gains would still leave them below last year’s  levels. The European Central Bank however, seems to regard 2017’s growth rate as unsustainably high and so sees some slowing in activity as consistent with its plans to taper asset purchases this year, and raise interest rates next. Today’s ECB policy meeting minutes are unlikely to reveal much new regarding those intentions.

After last week’s surprisingly strong July reading for UK retail sales, the CBI retail survey is expected to show an easing in August annual sales growth. This measure is often a poor indicator of monthly moves in the official data. For example it suggested that sales had slowed last month. However, its timeliness does garner some attention.

The US economic data releases are ‘second tier’ and so are unlikely to generate much interest in markets. However, new home sales data for July will provide further evidence of whether housing activity is faltering.

The US Fed’s Jackson Hole symposium will kick off early Friday morning (UK time) when the full programme will be released. 
Of most interest to markets will be Fed Chairman Powell’s speech, which is scheduled for 3pm BST tomorrow.

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