Will Jackson Hole land a knock-out for the Fed?
Hello and welcome back. If we were to suggest that Ivan Drago, the Russian fictional boxer from acclaimed film Rocky 4, had strong links to this weeks economic diary, we wouldn’t blame you for being confused. However, the setting for Rocky’s training camp in that legendary film was the mountainous region of Jackson Hole, which happens to be the centre of the world for financial markets this week with Chair Powell delivering his annual speech at a conference that also hosts global central bank leaders. As tempting as it, is we won’t attempt any hard/soft landing puns as we reference the boxing blockbuster.
Jerome Powell’s speech on Friday may be somewhat easier than it appeared it was going to be this time last week, after the story of the last 7 days has been one of the return of a Goldilocks scenario for the US economy, post continued softer inflation numbers and some strong Retail Sales figures that got US data back on a hot streak. By the end of the week investors were sniffing after riskier assets again and US yields were marginally higher with the dollar a tad softer, particularly against the pound, which happened to be the best performing currency in the G7. GBPUSD finished the week at 1.2930. We’ll come back to this shortly.
Over the weekend further fragments of hope have emerged on the geo-political front with US Secretary of State, Anthony Blinken, touching down in Israel to usher peace talks to their next stage with confidence growing that a ceasefire could be reached.
Indeed, even reports are emerging that Russia and Ukraine may be about to enter into talks in Qatar. The world lives in hope but it would be premature to believe cease-fires are imminent and there is certainly little market reaction as yet.
So, what do we expect from the Jackson Hole Symposium this year?
Well, considering the much hyped US rate cut next month there is a school of thought that it could be a non-event with much of the forward guidance already plotted. However, it would be a little foolish to rule out an indication on the pace of interest rate cuts and if Powell suggests it could be more than a steady string of 25 basis point revisions, alluding to a 50 basis point cut in September, this will land a shuddering blow to markets and particularly the dollar. Everything considered, including last weeks firmer numbers from the US and the string of crucial jobs figures between now and the FOMC meeting in September, it appears likely Powell could keep the rhetoric relatively similar to this months FOMC statement (which we get the minutes of on Wednesday night by the way).?
Looking further afield than Wyoming, a couple of hours flight east and you might land on the Democratic Convention that begins today and expect a Hollywood performance with a string of household names supporting Kamala Harris. Finally, focusing for a moment back to the UK, not only will Governor Bailey be at Jackson Hole and therefore could deliver some interesting insight but we also have PMI figures released on Thursday which could provide a telling look forward view on the health of the economy which will influence the MPC for the incoming bank rate decision.
Economic events this week
Tuesday
Wednesday
Thursday
Friday
Content spotlight: US Election Outlook: No, You Can’t Pretend it isn’t Happening.
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Great insights as always, Jonathan! The interplay between politics and economics is crucial for understanding market shifts. If you're looking to explore how these dynamics can impact your startup or B2B strategy, our page has resources that might be useful. Feel free to check us out for more tailored advice and updates!
Head of Commercial Finance, Birchstone Markets Ltd
6 个月Really insightful.