Risk Warning:☆At 19:30 tonight, the European Central Bank will announce the minutes of its July monetary policy meeting. Money markets are now fully pricing in a 100bps rate tightening by the ECB at its October meeting, and swap rates also show that the ECB will raise the deposit rate to 1% at its October meeting. Investors need to pay close attention to whether the minutes of the meeting will reveal the pace of future interest rate hikes by the European Central Bank and whether there is a “hawkish alarm”.

Global Views - List of Major Markets

Spot gold failed to challenge $1,755 several times, and is still oscillating above the $1,750 mark, and finally closed up 0.15% at $1,751.08/oz on Wednesday August 24. Spot silver closed up 0.01% at $19.11/oz .

The U.S. dollar index rose to a high of 109.13 after a short-term dive, erasing most of the previous gains and falling below the 109 mark, and finally closed up 0.06% at 108.57. The 10-year U.S. Treasury yield continued to rise and closed at 3.109%.

In terms of crude oil, affected by the progress of the Iran nuclear deal, the two oil prices showed a deep V trend in intraday trading, but finally recovered all the lost ground and continued the rally. WTI crude oil finally rose 1.78% to $95.36 per barrel. Brent crude oil finally closed up 1.6% to $101.69 per barrel.

The US stock Dow closed up 0.18%, the Nasdaq closed up 0.41%, and the S&P 500 rose 0.29%. Cruise ships, hydrogen energy, and popular Chinese concept stocks were among the top gainers, while infrastructure, banking, and steel stocks were weak.

European stocks continued to fall. Germany's DAX closed up 0.2% at 13,220.06 points. The UK's FTSE 100 closed down 0.22% at 7,471.51 points. The European Stoxx 50 closed up 0.41% at 3,667.46 points.

Precious Metals

Spot gold fluctuated slightly, and is currently trading around $1,755 On Thursday August 25, Beijing time. While geopolitical tensions and lingering fears of a global recession have attracted bargain hunters and safe-haven buying to support gold prices, U.S. core durable goods orders data came in better than expected. The market's expectations for the Fed to raise interest rates by 75 basis points in September have further increased, the US dollar is relatively strong, and the US bond yield has risen to an eight-week high, which puts the gold price at risk of returning to the decline in the short-term.

Days to focus on: Changes in the number of initial jobless claims in the United States and the performance of the revised GDP in the second quarter of the United States, pay attention to the minutes of the European Central Bank meeting.

Federal Reserve Chairman Jerome Powell will speak at the Jackson Hole Economic Policy Symposium on Friday August 26, which may provide some clues on the Fed's monetary policy tightening path. Market expectations are hawkish, and investors need to pay attention to changes in market expectations.

Fundamentals are mostly bullish

[Russia and Ukraine continue to fight in Donetsk and other places]

[West increases military support for Ukraine]

[French President: The situation may continue to deteriorate in the future]

[Global stock market is expected to usher in a cold winter, analysts cut most stock index year-end forecasts]

[US dollar index weakened slightly]

[Wells Fargo: The dollar is about to peak, the US will fall into recession early next year, forcing the Fed to cut interest rates]

Fundamentals are mostly bearish

[U.S. business spending on equipment rises, easing recession fears]

[In the 12 months ended March, the U.S. economy may have created 462,000 more jobs than previously estimated]

[U.S. stocks closed slightly higher, investors focused on the Jackson Hole central bank meeting]

[The probability of the Fed raising interest rates by 75 basis points in September rose to 60.5%]

[U.S. 10-year Treasury yields hit an eight-week high, and the market prepares for the Jackson Hole central bank meeting]

Crude Oil

U.S. oil was now at $95.26 per barrel In early trading on Thursday August 25, Beijing time. Oil prices rose nearly 2% on Wednesday, as U.S. crude oil and refined oil inventories both fell last week, and people were worried that the U.S. was reviving the Iranian nuclear program. Additional concessions to Iran will not be considered in the response to the draft agreement. However, OPEC sources said that a possible production cut by OPEC+ may not be imminent, which may limit oil price gains in the short term.

Intraday attention: the revised annualized quarterly rate of real GDP in the United States in the second quarter, and the number of initial jobless claims in the United States for the week ended August 20.

Positive factors affecting oil prices

[Kuwait announced to increase daily oil production to 2.811 million barrels]

[Record U.S. crude oil exports to continue through 2023]

[Canada will return to Russia all the natural gas pipeline turbines of the “North Stream-1” that need maintenance]

Negative factors affecting oil prices

[U.S. crude oil and refined oil inventories both fell last week]

[Finally reaching the Iran nuclear agreement still faces many difficulties]

[U.S. business equipment spending rises to ease recession fears]

[West increases military support for Ukraine]

[Russia and Ukraine continue to fight in Donetsk and other places]

[The U.S. economy may have created 462,000 more jobs than previously estimated]

[Many global oil traders stop trading with Indian refiner Nayara Energy]

On the whole, U.S. crude oil and refined oil have both declined, and Western countries have increased their support for Ukraine, which has continued to escalate geopolitical tensions and supported the bulls. In the final text of the Iran nuclear deal, the United States does not expect to make concessions, which will help the bulls to rise strongly. The Iranian nuclear deal may still face obstacles, and the oil price will maintain a bullish tone and is expected to approach the 100 mark. But OPEC+ sources said a possible production cut may not be imminent and could limit oil price gains in the short term.

Foreign Exchange

The dollar index is slightly down in the early trading session on Thursday, August 25, Beijing time, and is currently trading around 108.63. Even though data released on Wednesday showed that the New orders for U.S. capital goods grew at a slower pace in July than in June, which suggests that business spending on equipment may struggle to rebound after contracting in the second quarter. The dollar index remained higher on Wednesday and was near a 20-year high. Investors await Fed Chair Jerome Powell's speech at the annual gathering of global central banks in Jackson Hole on Friday for new clues on how aggressive the Fed will be in its fight against inflation.

Intraday focus: At 19:30 on Thursday, August 25, the ECB releases the minutes of monetary policy in July. On Friday, August 26, the annual meeting of the Jackson Hole Global Central Bank was held for three days. Fed Chairman Powell spoke at the annual meeting of the Jackson Hole Global Central Bank and he may give hints on the high cost of borrowing in the U.S. and how to reduce high inflation.

Investors have lowered their expectations that the Fed may be inclined to slow the pace of rate hikes because the U.S. inflation remains at an annual rate of 8.5%, which is well above the Fed's 2% target. Investors will be studying Powell's speech in Jackson Hole carefully for any signs that a slowing economy may prompt the Fed to change its strategy.

The traders of federal-funds futures expect that there is a 61% chance that the Fed will raise rates by another 75 basis points and a 39% chance that it will raise rates by 50 basis points at the meeting in September.

The market believes the dollar could give back some of its gains on Friday if Powell expresses any concerns about the impact of monetary tightening.

The Euro hit a 20-year low of 0.9900 against the dollar on Tuesday. It was shaken lower on Wednesday and closed down 0.04% at 0.9964. The euro was hit by concerns about economic growth as Europe faces an energy crisis. European indicators that the prices of Dutch natural gas rose again on Wednesday in recent months because the supplies of Russian natural gas to Europe via the main Nord Stream 1 pipeline will be interrupted for three days, which has unnerved investors. 

Concerns about slowing global growth also weighed on cyclical currencies such as the Australian and New Zealand dollars. The Australian dollar closed 0.27% lower against the U.S. dollar at 0.6908 on Wednesday, while the New Zealand dollar was 0.43% lower against the U.S. dollar at 0.6185.

The pound was weak against the U.S. dollar on Wednesday, closing down 0.30 percent at 1.1795.

Sam Zief, the head of JP Morgan Global Forex Strategy, said the pound has fallen 12 percent against the dollar so far this year, which is starting to reflect peoples concerns. As economic growth slows, higher price of natural gas will trigger inflation. If the inflation of U.K. continues to rise, the pound could fall to 1.14 against the dollar. 

Institutional Currency Viewpoint

1. Brown Brothers Harriman: EURUS will still test near 0.9615

① The Euro remains under pressure against the dollar after Tuesdays rally failed to break parity. Brown Brothers Harriman Bank expects the Euro against the dollar will still test the low of September 2002 at around 0.9615.

② Panetta, the member of ECB Executive Board, stressed that monetary policy “needs to rely strictly on data and take full account of the economic situation in the Eurozone”. It means that the first thing to fully understand that the possibility of recession in the Eurozone is strengthening the Euro against the dollar decline due to the epidemic, commodity price shocks, Russia-Ukraine conflict and other factors.

2. Credit Suisse: USDTRY is expected to be on track to end the quarter above 19.00

① Credit Suisse economists now expect a relatively orderly rebound in the dollar against the Turkish lira in the coming weeks and are targeting 19.00 for the pair at the end of the third quarter, which is only slightly above the forward rate.

② As the seasonal advantage of the current account disappears over the summer, the Turkish lira is expected to face greater challenges in the fourth quarter.

3. JP Morgan: Even the ECB rate hike can't stop the Euro from plunging

① The Euro is hovering below parity against the dollar after the recent selloff. JP Morgan believes that even a sharp rate hike by the ECB will not save the Euro from falling.

② Analysts say it is not so much monetary policy as linked crises such as a recession and a sharp reduction in Russian energy supplies that are weighing on the Euro against the dollar. Although special tools have been taken to reduce borrowing costs for the European Central Bank, these are unable to solve the above-mentioned crisis.

③ Sam Zief, the head of JP Morgan global foreign exchange strategy, said, interest rates have not become the dominant factor driving the currency market. The key issue, especially in the past month, is the lack of global growth. Higher interest rates cannot support the Euro when they are meant to stabilize inflation expectations and damage growth prospects.

4. Holland International: Eurozone economic weakness will continue

① Bert Colijn, Senior Eurozone Economist at ING, said, “We expect the Eurozone economy to have started a recession and the weakness to continue because the purchasing power of the Eurozone economy continues to tighten.”

② It complicates things for the ECB, but we do think we will still raise rates by 50 basis points in September. After that, we think the rapid cooling of the economy will lead to a pause in the ECBs rate hike cycle.

5.Validus：Elevated expectations of a Bank of England rate hike fail to boost the pound

① Marc Cogliatti, the head of global capital markets at Validus, said in a research note that the pound's failure to gain from market expectations that the Bank of England may adopt more tightening is a worrying sign for the pound.

② The U.K. released higher-than-expected inflation data last Wednesday, and higher-than-expected retail sales data on Friday. The market then raised expectations for a Bank of England interest rate hike, but the pound still fell and UK interest rates lost their correlation with the pound's movement.

③ This situation is similar to emerging markets, that is nominal interest rates move higher. But if inflation levels are higher, it also means that real interest rates are still falling.

Statement | Disclaimer

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