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Here are the latest developments in global markets:

FOREX: Dollar/yen pulled back below a two-week high of 111.48 reached early today, falling to 111.30, near Thursday’s close price ahead of Powell’s Jackson Hole speech. The dollar index, which measures the dollar’s strength against six major currencies was also in a bearish move, printing losses towards 95.33 (-0.34%) as the euro and the pound strengthened. Euro/dollar stood higher at 1.1585 (+0.42%), helped by solid GDP growth data out of Germany, and pound/dollar edged up to 1.2846 (+0.27%), unable to post sharper gains thanks to fears of a no-deal Brexit. Meanwhile in China, the foreign minister, Lu Kang, urged the US to back down from its protective tariff measures, saying earlier today that Beijing will keep retaliating if Washington continues to impose “unreasonable” trade frictions. Moreover, a Reuters report stated that the PBOC resumed its counter-cyclical factor in its currency fixing mechanism, pushing dollar/offshore yuan down to 6.83 (-0.91%). The Swedish krona jumped on the central bank’s comments today after Riksbank’s Deputy Governor said that the Bank does not need to “slavishly” follow the ECB, raising the odds for a rate hike in October. He also said that overseas risks are not affecting the country immediately and the economy is developing in line with forecasts. Dollar/krona dropped to a two-week low of 9.93 before it crawled up to 9.1268 (-0.16%). In the antipodean space, aussie/dollar stood higher at 0.7303 (+0.84%), recovering after the market-friendly Treasurer Scott Morrison replaced Malcolm Turnbull as prime minister, beating the former home affairs minister Peter Dutton, a top contender and a migration hardliner. Kiwi/dollar was also up on the day at 0.6667 (+0.51%). Dollar/loonie was slightly down at 1.3069 (-0.09%), while dollar/lira changed hands higher at 6.02 (+0.52%), aiming to end the week in the green after last week’s sharp fall. Dollar/rand was the worst performer, losing 1.06%.

STOCKS: European stocks opened higher on Friday, though with moderate gains as global trade conditions remained uncertain. At 1225 GMT, the pan-European STOXX 600 and the blue-chip Euro STOXX 50 were up by 0.21% and 0.17% respectively, both set to finish the week positive after three consecutive weeks of declines. The German DAX 30 rose by 0.16%, the French CAC gained by 0.40%, while UK’s FTSE 100 increased by 0.18%. The Italian FTSE MIB was the best performer, gaining 0.62%. Futures tracking S&P 500, Dow Jones and Nasdaq 100 were all in the green but held moderate gains, pointing to a positive open.

COMMODITIES: Crude oil prices maintained positive momentum as data displaying larger-than-anticipated declines in US oil inventories this week, as well as signs that the US renewal of sanctions against Iran are weighing on the Iranian oil supply, helped to boost the market. WTI crude hit a two-week high at $68.56/barrel (+1.08%) and Brent climbed to a one-month low of $75.52 (+1.07%). In precious metals, gold was recouping yesterday’s losses, last seen at $1,192.9/ounce (+0.68%). The yellow metal is on track to close the week in the positive territory after declining for the past six weeks.

Day Ahead: Powell’s speech at Jackson Hole the highlight with US durable goods orders on the agenda as well

On Thursday, US-Chinese two-day trade talks ended with no significant progress, just after import tariffs on $16 billion worth of products were triggered by each nation, increasing the likelihood of a further escalation in tit-for-tat tariffs that threaten global growth. However, the main focus today is what Fed Chair Jerome Powell has to say at the Jackson Hole Symposium of Central Bankers at 1800 GMT. His topic is on “Monetary Policy in a Changing Economy” and investors expect the Fed chief to maintain an upbeat view on the US economy and keep the door wide open for two more rate hikes this year despite US President’s complaints about the strategy.

Looking at the economic calendar, at 1230 GMT, durable goods orders for July are scheduled to be released out of the US. Predictions are for durable orders to decline by 0.5% on a monthly basis from a positive reading of 0.8% m/m in the preceding month. As for the core measure excluding transportation, this is expected to accelerate to 0.5% from 0.2% before. Excluding defense items, the index is forecasted to tick lower, from 1.3% m/m to 0.8% m/m.

In energy markets, investors will keep a close eye on the US oil rig count issued by the Baker Hughes company at 1700 GMT.

Cleveland Fed President Loretta Mester said there's more momentum in the economy then she anticipated. And, she's been "upping" her forecasts, now expecting 2.75-3.00% for the year, and "probably close to 3%. She said that "the fiscal policy – the stimulus and the tax cuts – has been a positive for the economy in terms of demand growth and so that's one of the factors."

Mester also support the gradual path of monetary accommodation removal. But for now, it's hard to judge whether the fed funds rate needs to go above neutral rate. But her neutral rate, at 3%, is higher than her fellows.

St. Louis Fed President James Bullard said in a CNBC interview that he doesn't see much inflation in the economy. And, he went further saying that it's not a situation where Fed has to be "pre-emptive". And "if it was just me, I'd stand pat where we are and I'd try to react to data as it comes in."

Regarding growth, he said "it's going to be a good year, and part of that is fiscal stimulus". However, the economy is "going to slow in 2019 and 2020" and "that's the standard forecast that's out there".

Separately, Bullard told Bloomberg TV that Fed should not do anything that knowingly invert the yield curve. This sort of echoes comments of Atlanta Fed President Raphael Bostic.

US headline durable goods orders dropped -1.7% in July versus expectation of 1.0% rise. Ex-transport goods rose 0.2% versus expectation of 0.3%. However, it should be noted that non-military capital-goods orders excluding aircraft jumped 1.4%, showing solid increase in business investments. Shipments rose 0.9% which should provide solid contribution to Q3 GDP.

The overall set of data argues that the impact from escalation of US-China trade war didn't have material impact of business investments yet, despite the cries for lower confidence. However, August and September figures will provide a more realistic picture as larger batch of tariffs came into effect.

The British pound has reversed directions on Friday session and posted gains. In North American trade, GBP/USD is trading at 1.2845, up 0.26% on the day. On the release front, the number of mortgages approved by major UK banks dropped to 39.6 thousand, shy of the estimate of 40.6 thousand. The U.S releases durable good reports for July. Core durable goods are forecast to rise to 0.5%, while durable goods are expected to downturn, with an estimate of -0.7%. Federal Reserve Chair Jerome Powell will speak at the economic symposium at Jackson Hole.

Brexit continues to hover over the British economy like a dark cloud. With only seven months to go before the U.K takes the plunge and leaves the EU, both sides remain entrenched in their negotiating positions, as the scenario of a ‘hard Brexit’ is becoming a greater possibility with each passing day. Prime Minister May has to deal not only with hard-nosed European leaders, but with deep divisions over Brexit within her Conservative party. The British economy has performed fairly well, but big business is exasperated by the lack of clarity or direction from the government over Brexit. The uncertainty over the post-Brexit era has taken a toll on the British pound, which has shed 8.3% since the start of April. Earlier in August, the pound dropped below the 1.27 line, its lowest level since April 2017. Unless the EU and UK show remarkable flexibility and reach an agreement, traders can expect further headwinds for the struggling pound.

With a lack of data for the markets to digest the week, the Federal Reserve is in the spotlight. On Wednesday, the Fed released the minutes from its August meeting. The minutes noted that the U.S economy remains strong and hinted that the Fed would raise rates in September. However, policymakers expressed concern about escalating trade tensions, saying that a global trade war could hurt the U.S economy. On Friday, Fed Chair Powell will address the Jackson Hole symposium. With the heads of the ECB and Bank of Japan conspicuously absent, Powell’s speech will be the main event of the meeting. With a September rate hike practically a given, investors will be looking for Powell to discuss trade tensions, particularly with China, as well as the lack of wage growth despite a tight labor market. Earlier this week, Powell said that the Federal Reserve would maintain its independence and would not be influenced by President Trump’s criticism of the Fed’s plans to continue raising interest rates.

Entering into US session, Australian Dollar remains the strongest one for today as the local political turmoil has quickly settled. Markets generally welcomed Scott Morrison as new Prime Minister, and he ruled out calling a general election in near term. Fitch rating agency also said the leadership change will not have any impact of Australia's rating. New Zealand Dollar follows as the second strongest.

On the other hand, Yen is trading as the weakest one for today while Dollar's rebound lost steam. Fed Chair Jerome Powell's speech at 14:00 GMT at Jackson Hole symposium will catch most attention today. But we're not expecting anything drastic from there.

In other markets, European stocks are generally firmer today. FTSE is up 0.17% at the time of writing, DAX up 0.21% and CAC up 0.46%. Earlier today, Nikkei closed up 0.85% at 22601.77 while China SSE also rose 0.18%. But Hong Kong HSI and Singapore Strait Times ended in red, down -0.43% and -1.14% respectively. As Dollar softens, Gold is back above 1190.

The Canadian dollar is steady in the Friday session, after recording sharp losses on Thursday. In North American trade, USD/CAD is trading at 1.3066, down 0.11% on the day. On the release front, investors are braced for mixed results from durable goods reports for July. Core durable goods are forecast to rise to 0.5%, while durable goods are expected to downturn, with an estimate of -0.7%. Investors will be listening closely as Federal Reserve Chair Jerome Powell speaks at the economic symposium at Jackson Hole. There are no Canadian events on the schedule.

The Canadian currency has shown significant volatility this week and dropped 0.62% on Thursday. The decline was in response to another wave of tariffs between the U.S and China, which took effect on Thursday. The tariffs, valued at $16 billion, kicked in despite the fact that the parties were holding low-level trade talks at the same time. As expected, the talks did not yield any breakthrough. The escalation in trade sanctions is bad news for the export-reliant Canadian economy and is also weighing on investor risk appetite for minor currencies like the Canadian dollar. If the U.S slaps further tariffs on its trading partners, the Canadian dollar will be sailing into significant headwinds.

The Federal Reserve released the minutes of its July meeting, at which policymakers maintained the benchmark rate. The minutes noted that the U.S economy remains strong and hinted that the Fed would raise rates in September. However, policymakers added that the plan to continue with gradual rate increases could have to be halted if the global trade war worsens, as the trade war represents a major downside risk to the U.S economy. Fed Chair Jerome Powell will address the Jackson Hole Symposium on Friday, and investors will be listening carefully. Powell is expected to refer to trade tensions, as well as the fact that inflation and wage growth have lagged, despite a booming U.S economy. The minutes have cemented a rate hike in September, with market odds currently at 98%. The likelihood of a December rate hike stands at 57%

On the issue of disembarkation of 150 migrants being held on a coast guard ship in Sicily, Italian Deputy Prime Minister Lugi Di Maio insisted that other EU countries should share the burden. He threatened on television that "the soft line does not work, the hard line will be to withhold funds if they don't listen to us."

On the other hand, European Commission spokesman Alexander Winterstein told a news conference that "unconstructive comments, let alone threats, are not helpful and will not get us any closer to a solution. The European Union is a community of rules and it operates on the basis of rules, not threats,"

Envoys from a dozen members states meet in Brussels to discuss disembarkation from the guard ship Diciotti.

• U.S.-China trade talks wrapped up on Thursday with no signs of progress
• German Q2 final GDP was unrevised (QoQ: 0.5%, YoY: 2.0%)
• Focus on key speech from Federal Reserve Chair Powell at Jackson Hole

Asia:

• Japan July National CPI Y/Y: 0.9% v 1.0%e; CPI Ex-Fresh Food (core) Y/Y: 0.8% v 0.9%e; CPI Ex-Fresh Food/Energy (core-core) Y/Y: 0.3% v 0.3%e
• Australia Treasurer Morrison to replace Turnbull as PM after winning leadership election by a margin of 45 to 40.
• China Commerce Ministry (MOFCOM) China and the US had 'constructive' and 'candid' exchange over trade issues; both countries to keep communication on trade
• RBNZ Gov Orr:Reiterates stance that in no rush to raise interest rates; biggest challenge is getting inflation to rise

Europe:

• Italy Interior Min Salvini (also Dep PM): Italy could clash with EU on budget law. Saw the first signs of economic attack against Italy, rehearsal has begun
• UK Foreign Sec Hunt: thinks Parliament will only accept a Brexit deal that's in accord with the letter and spirit of the referendum
• South Africa Central Bank (SARB) Dep Gov Groepe: To respond if weak Rand currency was sustained and fed through to CPI.

Americas:

• White House official: US-China trade talks in Washington DC concluded; talks included structural issues in China and discussed how to achieve trade fairness
• Fed Kaplan (dove, non-voter): Comfortable with 4 rate hikes in 2018 (Note: implies 2 more to come). Expected 2019 to be a very strong year for US economy
• Fed's Bostic (dove, voter): FOMC has spent some time discussing the yield curve; Believed yield curve was only one signal among many used for the complex task of forecasting growth

Economic Data:

• (DE) Germany Q2 Final GDP Q/Q:0.5 % v 0.5%e; Y/Y: 2.0% v 2.0%e; GDP NSA Y/Y: 2.3% v 2.3%e
• (DE) Germany Q2 Private Consumption Q/Q: 0.4% v 0.6%e; Government Spending Q/Q: 0.6% v 0.6%e; Capital Investment Q/Q: 0.5% v 0.8%e; Construction Investment Q/Q: 0.6% v 1.8%e; Domestic Demand Q/Q: 0.9% v 0.6%e; Exports Q/Q: 0.7% v 1.4%e; Imports Q/Q: 1.7% v 1.5%e
• (DK) Denmark July Retail Sales M/M: -0.3% v -0.1% prior; Y/Y: 0.5% v 3.1% prior
• (FI) Finland July PPI M/M: 0.4% v 0.7% prior; Y/Y: 6.1% v 6.2% prior
• (FI) Finland July Preliminary Retail Sales Volume Y/Y: +0.9% v -0.3% prior
• (NO) Norway Jun AKU Unemployment Rate: 3.9% v 3.8%e
• (CZ) Czech Aug Business Confidence: 16.4 v 15.4 prior; Consumer Confidence Index: 7.8 v 9.3 prior; Consumer & Business Confidence: 14.7 v 14.2 prior
• (ES) Spain July PPI M/M: 0.4% v 1.0% prior; Y/Y: 4.6% v 4.1% prior
• (AT) Austria Jun Industrial Production M/M: -1.5% v +2.6% prior; Y/Y: 5.0% v 6.9% prior
• (SE) Sweden July PPI M/M: 0.9% v 0.8% prior; Y/Y: 8.4% v 8.0% prior
• (CN) Weekly Shanghai copper inventories (SHFE): 146.6K v 155.1K tons prior
• (PL) Poland July Unemployment Rate: 5.9% v 5.9%e
• (PL) Poland Q2 Unemployment Rate: 3.6% v 4.0%e
• (TW) Taiwan July M2 Money Supply Y/Y: 3.7% v 4.1% prior
• (UK) July BBA Loans for House Purchases: 39.6K v 40.7Ke

Fixed Income Issuance:

• (IN) India sold total INR120B vs. INR120B indicated in 2023, 2028, 2035 and 2046 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.2% at 384.0, FTSE +0.0% at 7564, DAX +0.1% at 12311, CAC-40 +0.2% at 5430, IBEX-35 +0.3% at 9593, FTSE MIB +0.5% at 20704, SMI +0.0% at 9050 S&P 500 Futures +0.2%]

Market Focal Points/Key Themes:

• European Indices trade slightly higher across the board following on from a mixed Asian session and stronger US futures.
• On the corporate front Kingspan, Kongsberg Gruppen are among names trading higher after results, with U-Blox a notable decliner after cutting outlook. Shire trades higher after FDA approval of Takhzyro. On the M&A front, Unicredit trades higher after reportedly hiring Rothchild on potential integration with Socgen; Petrofac also trades higher after divesting its interest in GSA development to Ithaca.
• Looking ahead notable earners include retailers Hibbert, Footlocker and Buckle.

Movers

• Technology U-Blox [UBXN.CH]-17% (Earnings, cuts outlook)
• Industrials Kongsberg Gruppen [KOG.NO]+11.5% (Earnings), Kingspan [KGP.UK]+6.8% (Earnings)
• Financials Unicredit [UCG.IT] +0.4% (Reportedly hired bankers on potential deal with SocGen)
• Healthcare Shire [SHP.UK]+2.6% (FDA Approval of TAKHZYRO), Bachem -4.2% (Earnings)
• Energy Petrofac [PFC.UK]+1.2% (Divestment)

Speakers

• Sweden Central Bank (Riksbank) Dep Gov Jochnick: Inflation was rising and close to the 2% target. Reiterated that that rate path pointed to hike by end-2018 with probability of an Oct hike
• Norway Sovereign Wealth Fund expert committee believed that it should remain invested in oil stocks
• President Trump reportedly said to offer Italy help with buying government bonds (no details on how it would be done).
• Australia’s new PM Morrison stated that would consider new cabinet over the weekend and pledged that the new ministry to be sworn in next week. To name Josh Freydenberg as the new Treasurer. No plan for elections any time soon (**note: Elections must be held by May 2019).He added that his govt immediate priority was the drought
• China Finance Min Liu Kun reiterated stance that will continue 'hitting back' at the US over trade. To increase fiscal spending to support workers hurt by trade frictions

Currencies

• Major FX pairs were relatively quiet with focus on the upcoming key speech from Federal Reserve Chair Powell at the Jackson Hole symposium.
• EUR/USD was slightly higher at 1.1565 area. The in-line German Q2 GDP data did little to prompt any fresh bets on currencies. Dealers eyeing the weekly close in the pair to determine whether the bearish H&S formation remained intact.
• GBP/USD poised to register its 1st w/w rise in six weeks as UK Gov officials were sounding more upbeat on the possibility of achieving a Brexit agreement. Pair holding above 1.2830 just ahead of the NY morning.
• EUR/SEK moved lower as Riksbank Dep Gov Jochnick added a hawkish tilt to the 1st potential rate hike. Jocknock saw Oct as a possibility compared to the Board view of a hike before year-end. EUR/SEK trading at 10.5250
• AUD/USD staged a relief rally after political clouds cleared with Scott Morrison (former Treasurer) winning a Liberal leadership challenge to become Australia’s PM

Fixed Income

• Bund Futures trades at 163. down 10 ticks retracing some of the move as European Indices trade higher. Resistance moves to 163.82 then 164. A downside break of 163.00 sees 162.69 initially.
• Gilt futures trades at 123.29 down 6 ticks following the move in Treasuries. Continued support at 123.12, with a continued move higher targeting 123.93 then 124.00.
• Friday 's liquidity report showed Thursday's excess liquidity fell from €1.873T to €1.856T. Use of the marginal lending facility rose from €61M to €68M.
• Corporate issuance saw JP Morgan raise $1.3B in the primary market. For the week ended Aug 15th Lipper fund flows reported IG funds show inflows of $1.8B.

Looking Ahead

• 05:30 (ZA) South Africa to sell ZAR600M in I/ L 2029, 2038 and 2046 bonds
• 06:00 (UK) DMO to sell €5.5B in 1-month, 3-month and 6-month bills (£2.0B, £2.0B and £1.5B respectively)
• 06:45 (US) Daily Libor Fixing
• 07:00 (BR) Brazil Aug FGV Construction Costs M/M: 0.3%e v 0.7% prior
• 07:00 (BR) Brazil Aug FGV Consumer Confidence: No est v 84.2 prior
• 08:00 (CL) Chile July PPI M/M: No est v %1.9 prior
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:05 (UK) Baltic Dry Bulk Index
• 08:30 (US) July Preliminary Durable Goods Orders: -1.0%e v +0.8% prior; Durables Ex-Transportation: 0.5%e v 0.2% prior; Capital Goods Orders (Non-defense/ex-aircraft): 0.5%e v 0.2% prior; Capital Goods Shipments (Non-defense/ex-aircraft): 0.3%e v 0.7% prior
• 09:00 (BE) Belgium Aug Business Confidence: -0.5e v 0 (nil) prior
• 09:00 (MX) Mexico Q2 Final GDP Q/Q: -0.1%e v -0.1% prelim; Y/Y: 2.8%e v 2.7 % prelim; Nominal GDP Y/Y: 7.5%e v 6.4% prior
• 09:00 (MX) Mexico Jun IGEA Economic Activity Index (Monthly GDP) Y/Y: 1.6%e v 2.2% prior
• 09:00 (MX) Mexico Q2 Current Account Balance: -$4.1Be v -$0.7B prior
• 10:00 (US) Fed Chair Powell speech at Jackson Hole symposium
• 11:00 (EU) Potential Sovereign ratings after European close (Iraq Sovereign Debt to be rated by S&P and Sweden and Romania Sovereign Debt to be rated by Moody's)
• (SE) Sweden Sovereign Debt to be rated by Moody's
• 13:00 (US) Weekly Baker Hughes Rig Count data

The DAX index continues to have an uneventful week. Currently, the pair is trading at 12,378, up 0.10% on the day. On the release front, German Final GDP improved to 0.5% in the second quarter, matching the estimate. Investors will be monitoring the economic symposium at Jackson Hole as Federal Chair Jerome Powell addresses the meeting.

The ECB released the minutes of its July meeting on Thursday. Policymakers were in agreement that economic growth in the eurozone was as expected, and saw no need to tweak monetary p0licy. The minutes noted that the eurozone economy remained in expansion mode and unemployment was falling. However, the threat of protectionism and a global trade war marked serious concerns, which if not addressed, could dampen eurozone growth. Inflation has risen to 1.7%, which some, though it remains unclear if this meets the ECB target of “close to but below 2.0%”. With the ECB expected to wind up its asset-purchase program in December, investors will be looking for policymakers to confirm this move.

With a lack of data for the markets to digest the week, the Federal Reserve is in the spotlight. On Wednesday, the Fed released the minutes from its August meeting. The minutes noted that the U.S economy remains strong and hinted that the Fed would raise rates in September. However, policymakers expressed concern about escalating trade tensions, saying that a global trade war could hurt the U.S economy. On Friday, Fed Chair Powell will address the Jackson Hole symposium. With the heads of the ECB and Bank of Japan conspicuously absent, Powell’s speech will be the main event of the meeting. With a September rate hike practically a given, investors will be looking for Powell to discuss trade tensions, particularly with China, as well as the lack of wage growth despite a tight labor market. Earlier this week, Powell said that the Federal Reserve would maintain its independence and would not be influenced by President Trump’s criticism of the Fed’s plans to continue raising interest rates.