Trading insights: Oil prices rip higher, stocks slide and focus shifts to Powell and Lagarde’s speech

Here’s what’s driving markets:

• BRICS summit reveals plans for 2024 expansion
• Oil prices focus on weaker demand outlook while gold prices rose.
• Stocks slide, gold turns indecisive and GBP/USD spirals lower.
• German business climate index misses expectations.
• Fed Chair Jerome Powell and ECB president Christine Lagarde in the spotlight.

All eyes on Jackson Hole - Fed Powell and ECB Lagarde to speak

Over the past week, a wide range of data releases have continued to highlight the potential for a global recession, underpinned by rising interest rates and a global economic slowdown.

With China, Europe and the United Kingdom showing clear signs of weakness (with economic data underperforming), the world’s largest economy, the United States, has remained resilient. Despite the aggressive rate hiking cycle, the labour remains firm, and consumer spending has remained relatively robust.

But the high interest rates are impacting other areas of the economy, such as the banking sector and the retail sector whose earning reports have provided a gloomy outlook.

As interest rates reduce the purchasing power of consumers, market participants have been looking for signs of when the Federal Reserve (Fed) may pivot, markets are looking at the economic calendar for these clues.

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Economic calendar today:

• Michigan consumer sentiment final (Aug) - 16:00 CET
• Fed chair Powell speech - 16:05 CET
• ECB president Lagarde speech - 21:00 CET

For GBP/USD, the currency pair could continue to slide if the Fed hints at higher rates for longer, potentially supporting Dollar strength.

Similarly, EUR/USD will likely be influenced by both speeches, depending on the narrative expressed by the central banks.

With gold’s ability to act as a hedge against the US dollar and recession risks, the prospects of a near-term rate pivot (an end to rising interest rates) may help boost the safe-havens appeal, pushing prices back toward $1,920, with the 200 - day moving average (MA) holding support at $1,900.

Gold weekly chart with CCI in oversold territory

Oil Rips Higher on BRICS Expansion Plans

The annual BRICS summit wrapped up on Thursday, 24 August, where the current members (Brazil, Russia, India, China and South Africa) revealed the plans for a further expansion of the group.

With major oil exporter Saudi Arabia, Iran, Egypt, Argentina, Ethiopia and the United Arab Emirates (UAE) among the nations invited to join the bloc, establishing BRICS plus would increase the group’s dominance over oil and energy-related commodities.

This would also allow the member nations to trade in a currency segregated from the US Dollar (the current reserve currency).

Although oil prices have recently been underpinned by increasing concerns over China’s property market, concerns over the BRICS expansion and what it means for oil supply has provided a temporary catalyst for prices action, driving Brent crude 1.60% higher in today’s session.

Brent crude daily chart

If prices continue to rise, a break of $84 could open the door for the weekly high of $85.48 and a potential retest of the monthly high of $87.71.