Markets get that Bernanke bounce

We got no blockbusting policy from Jackson Hole on Friday, but the Fed chairman failed to rule out further action if the US economic outlook continues to deteriorate. The markets were probably wanting something more concrete, but Uncle Ben did deliver the one thing guaranteed to lift equity markets – hope. Instead he talked about fiscal policy, probably paving the way for President Obama to announce stimulus measures in a speech on 5 September he also sounded reasonably positive on the economic recovery, which may or may not turn out to be ill judged given we have an important non-farm payroll number coming up this Friday. Other US data of note this week include the minutes from the last FOMC meeting on 9 August and consumer confidence, both due this afternoon. Given the importance of Friday’s speech it is unlikely that we get anything unexpected in the Fed minutes.

Sterling should take a bit of back seat this week, it has been stuck in trading ranges against both the dollar and euro in recent weeks and with a lack of any substantive data due this week we can expect that to continue. The little data that is due this week is mostly housing related and includes mortgage approvals and the Nationwide house price survey along with net consumer credit, manufacturing and construction PMI later in the week.

The euro has started the week on a roll, gaining against both the dollar and Sterling even without any real data to back up the rally. The merger between two of the struggling Greek banks seems to have lifted market sentiment, but quite how two bad banks equals one good one is beyond me! Tomorrow we have a raft of EU data due with unemployment and CPI figures right across member states out in the morning. Look out, as ever, for both the German figures, the Eurozone needs the German economy to keep dragging everyone else along, if we see them start to slow down the debt problem begins to deteriorate even further.