It’s going to be all about the anticipation ahead of the main event later in European trading today. All eyes are on Fed chair Powell’s speech with the Jackson Hole Symposium set to kick off later today.
Given the market positioning, one can argue that traders and investors have pulled back on the more dovish Fed sentiment from last week. That as the expectation is for Powell to not pre-commit or be explicit about cutting rates next month. If anything, Powell is expected to reaffirm a more data dependent approach and leaving it to the upcoming US jobs data in two weeks’ time.
The anticipation that Powell might lean more hawkishly has seen stocks pull back from the highs this week and the dollar firming in the past few sessions. That as we also see Fed policymakers give a little bit of a nudge in not suggesting that September is a given. As things stand, traders are pricing in ~74% odds of a 25 bps rate cut now. That is a modest retreat from having fully priced in such a rate cut after the US CPI report last week.
Here are some notes to wrap your head around before we get to big stage later in the day:
- Jackson Hole on the horizon for markets this week
- Where is nowcasts for growth and inflation ahead of Powell’s speech
- What is rate expectations for the Fed ahead of Powell’s speech
- Implied volatility levels for major assets ahead of Jackson Hole
- Fed chair Powell to adopt a more cautious approach at Jackson Hole – MUFG
- Fed focus now turns to labour market with Jackson Hole up next – SocGen
- Jackson Hole Symposium Agenda
- What else to expect from the Jackson Hole Symposium later this week?
This article was written by Justin Low at investinglive.com.