By Ben Robson,
The week of 20th - 24th of August, although short on economic announcements, was action-packed in terms of the drama that orbits Mr. Trump’s presidency. On Tuesday evening, Paul Manafort - Trump’s former campaign Chairman, was found guilty of tax and bank fraud in a district court in Alexandria, Virginia, followed moments later by former Trump attorney, Michael Cohen, pleading guilty in Federal Court in Manhattan to violating campaign finance law on behalf of a “candidate.”
Mr. Trump, never slow to react and shoot from the hip, amid rumors of his possible impeachment should the Democrats seize control of the House of Representatives in November’s mid-term elections, distanced himself from Cohen and implied that markets would collapse if he were to be impeached in an interview with Fox news! In a different interview with Reuters, the US President has accused both China and Europe of being currency manipulators, and further still has expressed his concern at Fed Chairman Powell’s stance on gradual interest rate hikes in the US. Fed Chair Powell promptly reiterated that “the strength of the U.S. economic expansion justifies gradually raising interest rates,” in his speech during this weekend’s Fed-hosted 3-day central bank symposium in Jackson Hole, USA.
Which all sets us up nicely for the major economic events of this week, 27th – 31st August, when the US releases Consumer Confidence for August on Tuesday (expected at 127 vs 127.4 for July) and its second reading of 2nd quarter GDP on Wednesday, which is expected to come in at a whopping 4%. Simultaneously, US Personal Consumption Expenditure (Q2, second reading) is set to be released (also expected at 4%). If these three numbers hit the mark, then without doubt there may be pressure on the Fed to act more quickly on a runaway US economy versus that of the rest of the world. It’s no surprise that US equities on both the Russell 2000 Index and the S&P 500 index set record highs last week, as easy monetary policy and fiscal stimulus have combined to fuel US consumer confidence and stock markets. With more rate hikes in store, a strong US dollar is a consequence of this. Not market manipulation!
On Thursday, the main event is Canada GDP (Year on Year for June) which is expected at 2.5%. Friday sees Eurozone CPI (YoY Aug exp 2.1%) as well as US Chicago Purchasing Managers Index (Aug exp 63 vs 65 in July) and University of Michigan Sentiment Index (Aug exp 95.5 vs 95.3 for July).
For those who wish to trade “down-under” the Australian dollar seems to be suffering from political leadership turmoil - a new PM Scott Morrison was voted in on Friday to replace Malcolm Turnbull; Central bank reluctance to raise interest rates - telegraphed by RBA Governor Lowe in his semi-annual testimony just one week ago; and of course, a strong US dollar. Perhaps Mr. Trump will accuse Australia of being currency manipulators too!
This Article was prepared and accomplished by Mr. Ben Robson in his personal capacity. The opinions expressed in this article are Ben’s own and do not reflect the view of Equiti
