Markets await Janet Yellen's speech

Daily Analysis - 26/08/2016

Federal Reserve Chair, Janet Yellen is due to give a speech today at the Jackson Hole Symposium

The markets will be on the edge today as the Fed Chair; Janet Yellen is expected to talk about monetary policy during her speech at the Jackson Hole annual symposium. With the next Fed meeting due in September, the markets will be looking for any clues from Ms. Yellen that could provide forward guidance for the markets in respect to whether the Fed will hike rates in September or not.

Japan producer price index rises in July

In what could be early signs of inflation creeping into the consumer price index, Japan's PPI posted a surprise increase in July. Official data from the Bank of Japan on Thursday showed that producer prices increased 0.40% in July, beating estimates of a 0.10% increase. July's PPI reading marks an increase in nearly 6 months after PPI remained stagnant at 0.20% growth. On a month over month basis, PPI was seen rising 0.40%. Driving prices at the factory gate higher were individual components with prices for advertising, communications and leasing while prices for transportation and postal activity fell during the same period.

German Ifo business confidence slips

Business confidence in Germany dropped unexpectedly in August, data from the Ifo institute showed on Thursday. The German business sentiment index fell to 106.2 in August. This was lower than July's reading of 108.3 and missed forecasts of an increase to 108.5. The current conditions index was also weaker, falling to 112.8 in August compared to 114.8 in July and missing estimates of an increase to 114.9. The euro was however unconcerned by the report as other economic data released included Spain's Q2 GDP which showed that the economy posted a growth rate of 0.80% in the second quarter.

US durable goods orders rebounds in July

US durable goods orders posted a strong comeback in July reversing the declines from the month before. Data from the commerce department showed on Thursday that US durable goods orders which includes long lasting factory goods increased 4.40% in July after falling 4.20% in June. July's durable goods orders beat estimates of a 3.70% increase that was forecast. Excluding transportation equipment, US durable goods orders rose 1.50% on the month after falling 0.30% in June. The data pointed to US manufacturers entering the second half of the year on a firm footing after weak second quarter growth. July's durable goods orders also posted the strong gains since October last year.

US GDP growth expected to be revised lower

The second quarter GDP report for the US is expected to be released at 1230 GMT today. After initial reports suggested that the US economy grew at a pace of 1.20%, the forecasts for the second revision point to the downside. Economists now see US second quarter GDP growth rising only 1.10%, slower than the initial estimates and marking a weak pace of economic growth. The lower revision to the Q2 GDP is based on the fact that the latest US economic data showed an increase in imports and lower business inventories. Following the GDP report, the main event will however be the speech by Janet Yellen which will overshadow the GDP release earlier in the day.