Risk-off Sentiment Persists on Wednesday

Meanwhile, US equity markets appear to be rolling over as the recent steep rally might be running out of steam. The same can be applied to EU indices.

Miserable US macro data

The US Services S&P Global PMI dropped to 44.1 yesterday. At the same time, the manufacturing index contracted at a slower-than-expected rate, falling from 52.2 in July to 51.3 now.

SP Worldwide PMIs for the majority of the main economies, however, showed sluggish economic growth and even recession, demonstrating it is a global problem.

Other information revealed that New Home Sales fell by 12.6% in July after falling by 7.1% in June.

The CME Group FedWatch Tool, however, reveals that markets are still pinning a 51.5% chance on a rate increase of 75 basis points in September.

Data on July Pending Home Sales and Durable Goods Orders will be presented in the US economic calendar throughout the second half of the day.

Fed stays hawkish

In other news, Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, stated on Tuesday in Minneapolis that the Fed must tighten monetary policy. “We face the danger of unanchoring inflation expectations when inflation hits 8% or 9%, which might have extremely negative consequences.”

Investors are on edge ahead of the central bank meeting at Jackson Hole in Wyoming later this week because of these remarks, the most recent in a string of hawkish Fed speeches. They anticipate Fed chair Jerome Powell to deliver an aggressive message of tightening and dash hopes for a rate cut next year.

Elsewhere, according to prominent economist Marcel Fratzscher of the German Institute for Economic Research, the economic effects of Russia’s invasion of Ukraine will be felt for years in Germany, the Eurozone’s largest economy and primary engine of growth.