Today is literally packed with important economic news. After the publication of weak data, the Japanese yen strengthened by 20 points, while the Nikkei Stock Average index ended the day down 1.2%.
In July, the core consumer price index fell by 0.4%. The Bank of Japan still has difficulties accelerating inflation, despite a strong monetary policy easing program in an attempt to reach the inflation target of 2%. And, apparently, the Bank of Japan may again have to stimulate inflation in the world's third largest economy.
At 11:30 (GMT +3) we expect the publication of the most important data for the UK (GDP for the 2nd quarter (pre-release). An increase of 0.6% and 2.2% y-o-y is expected).
At 15:30 the preliminary release of the GDP price index and annual data on US GDP for the 2nd quarter (forecast - 1.1% growth) are expected. Inflation index and personal consumption expenditures price index in the US for the 2nd quarter (pre-release). It is forecasted to increase by 1.9% and 1.7% respectively.
However, the most important event today will be the speech of the Fed's Janet Yellen at the annual conference in Jackson Hole. Investors will closely watch her to assess the future prospects of increase in US interest rates.
Futures on the Fed's interest rates indicate a 57% probability of a rate hike in December, the probability of US interest rate hike in September is estimated at 18% (against 12% last week). More conservative market participants predict the first rate hike not sooner than January, and most likely - in the middle of 2017.
Trading activity is low today. the WSJ dollar index, which tracks the US currency against a basket of 16 currencies, ended the session on Thursday almost unchanged.
Quite positive macroeconomic data from the United States published on Thursday did not help the dollar, and today it continues to decline on the foreign exchange market. Investors hardy believe that Yellen might hint at a possible rate rise in September or definitely point out the prospects of the Fed’s monetary policy.
At the same time, statements by some Fed officials last week, which indicated that the likelihood of an interest rate increase in the US in the coming months is high, contributed to the strengthening of the dollar on the foreign exchange market and the weakening of prices for precious metals, including gold.
Interest rate increase usually puts pressure on gold, because in this case the interest earning assets are becoming more popular. A stronger dollar also makes gold, whose prices are denominated in US currency, less attractive for holders of other currencies as the cost of borrowings for its acquisition and storage grows.
Janet Yellen's speech is scheduled for 17:00 (GMT +3). Closer to the event, it is advisable to close positions. If J. Yellen gives a hint of the possibility of a rate hike in September, the dollar will strengthen sharply on the currency market.