Trading insights: US economic data on deck, China cuts mortgage rates, stocks trade flat

What’s driving financial markets?

• Germany’s consumer confidence reading pushes Germany 40 to resistance
• US economic data expected to rate probabilities and volatility for the remainder of the week
• FTSE gains over 1%, driving the stock index toward the 50 - day MA

Will GDP, PCE and NFP’s drive the Fed’s hand?

With the USD, accounting for a large portion of global trade, the dollar has gained a reputation both as a reserve currency and as a safe-haven asset, making its price movements relevant for commodities, stocks, cryptocurrency and forex (currency pairs).

As the Federal Reserve (the US central bank) continues to monitor economic data for signs of a recession, this week’s economic agenda hosts a slew of critical releases, including today’s ADP non-farm employment change and preliminary GDP which could provide signs of how the US economy has performed over the past month.

Furthermore, the release of the Fed’s preferred measure of inflation (core PCE) and the non-farm payroll report could drive USD strength/weakness, as market participants weigh the economic outlook with the potential for additional rate hikes for the remainder of the week.

With approximately 78% of participants expecting the Fed to hold rates steady at the September meeting, with a 60% probability of a hike at the November meeting.

Fed meeting probabilities

CME Fedwatch Tool

China’s economic woes intensify adding to recession risks

With a slew of economic data from the US, China and Europe scheduled this week, Chinese property giant Country Garden has expressed concerns over their maturing bonds, increasing the risks of a default.

This adds to fears over China’s already struggling economy, exacerbating fears of a severe recession.

After authorities announced a series of measures to promote the trading of domestic stocks (including reducing the stamp duty charged), regulators have now announced plans to cut mortgage rates in an effort to support the property market.

EUR/USD, GBP/USD, USD/JPY overview

With the German Gfk consumer climate index missing expectations earlier today, Euro area inflation could add to the outlook for Europe and the ECB.

As EUR/USD struggles to break above 1.080, GBP/USD has edged higher, allowing the pair to retest resistance at 1.262.

GBP/USD daily chart

Prepared using TradingView

For SPX500, US100, Dax, and FRA40, prices are trading flat, with the UK UK100 advancing 1.25% (at the time of writing), driving prices toward the 50 - day MA, providing resistance at a level of 7,841.