The economic calendar on Wednesday, August 25 is rather poor. There are only two reports of high importance today.
The first of these is the Ifo business climate index out of Germany for the month of August. This amounted to 99.4, lower than the forecast of 100.4, disappointing investors somewhat. The drop was most likely due to supply interruptions caused by the coronavirus pandemic, which is hindering businesses from fulfilling their usual plans.
The second report of note today is the durable goods orders for July in the United States. The forecast is set at -0.3%.
Meanwhile, speculation over what is going to happen at the Jackson Hole Symposium is keeping investors on their toes. Up until recently, pretty much everyone expected that the Federal Reserve would use this meeting - which starts tomorrow, to announce its schedule for tapering bond purchases.
However, sentiment is beginning to shift due to the spread of the coronavirus, particularly in the United States. The US has seen a spike in Covid-19 cases recently, declaring daily infection rates of up to 178K last week (147K yesterday). Due to the new outbreaks, some experts have warned that the US labor market might take another hit, which is going to call for more stimulus rather than less.
Thus, now there is a growing number of economists that expect that the Fed might not announce anything like what we expected at Jackson Hole and instead push its plans for monetary policy tightening a month or two into the future.
Meanwhile, Democrats had a win in the House of Representatives, as the more radical among them managed to convert the rest to approve a $3.5 trillion stimulus package. The proposal will face a lot of criticism when it moves to the Senate, but at least it got pushed to the next stage.
Today US stock indices will trade slightly higher due to a satisfactory earnings season and the aforementioned shift in sentiment regarding asset purchase tapering by the Federal Reserve. Still, in anticipation of the actual symposium, we don’t expect any big swings in either direction.
