Key events to watch in the week ahead: 21 – 25 August 2023

This week’s overview

A hawkish takeaway in the recent Federal Reserve (Fed) minutes and mounting risks in China’s property sector has kept market sentiments in its risk-averse mode this week, as the previous rally in Wall Street continues to unwind. Thus far, the S&P 500 is down close to 5.4% from its July peak, with rate-sensitive growth sectors bearing the brunt of the sell-off on higher Treasury yields. Higher yields have been well-received by the US dollar, which found a new two-month high this week while keeping a lid on commodities prices. Notably, gold prices are trading at its lowest level since March 2023, falling below its 200-day moving average (MA) for the first time this year.

Heading into the new week, here are four key events to watch:

23 August 2023: Flash manufacturing & services PMI from Australia, Japan, France, Germany, Eurozone, UK and US

Previous month’s readings continue to see further weakening in the purchasing managers index (PMI) data across the board, notably with manufacturing activities in major economies dipping further into contractionary territory while expansion in services activities softens. Notably, the HCOB flash Germany manufacturing PMI came in at its 38-month low at 38.8.

Over at the US, flash composite PMI has moderated for the second straight month. Given that the recent Federal Open Market Committee (FOMC) minutes have made course correction on previous recession calls, some holding up in economic conditions will be sought in the upcoming data to support soft landing hopes.

23 August 2023 (Wednesday, 1pm SGT): Singapore’s Consumer Price Index (CPI)

Singapore’s CPI has come in lower than expected for the past two months, moderating from its peak of 7.5% in October 2022 to the current 4.5%, as policy tightening continues to work its way into economic conditions. Likewise, the core aspect has softened to below 5% for the second straight month in June as well, with expectations for pricing pressures to ease further next week.

Thus far, the USD/SGD has pushed to a new year-to-date high above the 1.360 level, with any softer read in Singapore’s inflation figures likely to support the pair further. Aside, Singapore’s July industrial production data will be released next week on 25 August 2023, 1pm SGT.

24 – 26 August 2023: Jackson Hole Economic Symposium

The Federal Reserve’s three-day annual Jackson Hole conference will begin on 24 September, Thursday, with the focus to revolve around what various central bankers may say with regard to the path of monetary policies. Thus far, most central banks are perceived to be nearing the end of tightening, but continue to maintain their data-dependent stance, given that inflation is still multiple-fold that of their inflation target.

Notably, Fed Chair Jerome Powell’s speech will be in the spotlight. Following fresh updates on US inflation and labour market data released after the previous FOMC meeting, as to what factors the Fed Chair may focus his attention on will be on the lookout. For now, rate expectations remain firmly priced for rates to be kept on hold through the rest of the year before rate cuts in May 2024.

25 August 2023 (Friday, 7.30am SGT): Japan’s Tokyo CPI

Generally looked upon as a leading indicator for the nationwide inflation trend, the upcoming Tokyo CPI will be on watch next week to provide a first glimpse into the pricing situation for August. Thus far, the Bank of Japan (BoJ) has been attempting to edge closer towards policy normalisation, but are still signalling for a more gradual pace, given that downside risks to growth persist while subdued wage pressures still cast some doubts on achieving sustainable inflation.

With the BoJ providing more flexible bandwidth around its yield curve control policy, its 10-year government bond yields are trading at its highest level since 2014. Any signs of inflation being kept under control next week may provide further room for patience for the BoJ. Given earlier adjustments in policy settings back in July, further policy tweak in the September meeting may seem unlikely, barring any significant upside surprises.