All eyes are on the Fed Chairman Jerome Powell at Friday's Jackson Hole speech, with markets pricing in a lower odds of a September rate cut than last week, currently at 83%, even with headline inflation running a full percentage point above the Fed's 2% target. Recent economic data presents conflicting signals: July's weak jobs report of only 73,000 new positions suggests labour market softening, while increases in services inflation have raised concerns among Fed officials about declaring victory over rising costs. Powell will likely unveil the Fed's updated policy framework, moving away from the 2020 flexible average inflation targeting approach that may have contributed to recent inflation overshoots. The Fed chair had also been facing relentless pressure from President Trump to cut rates before tariffs set in, raising doubts of the central bank's independence. Markets will closely scrutinise Powell's remarks for policy hints, though analysts expect only vague language that may disappoint traders seeking clearer direction.
EQUITY
Wall Street opened the week slow, with the main index barely moving, although smaller caps grew. Focus now turns to leading retailers' earnings, including Walmart, Home Depot, and Target, to provide insights into consumer spending. Investors are also awaiting Federal Reserve Chair Jerome Powell's speech at the Jackson Hole symposium on Friday, with markets pricing in an 83% chance of a 25 basis point rate cut in September, where it used to be near certain before PPI data.
GOLD
Gold prices are still at a crossroads, with higher lows and common highs, trying to find a clearer direction due to conflicting market and geopolitical trends. Goldman Sachs attributes the previous rally to "conviction buyers" for hedging and political reasons, estimating that every 100 tonnes of net purchases drives gold prices up 1.7%. They maintain a bullish outlook with forecasts of $3,700 by the end of 2025 and $4,000 by mid-2026, citing continued geopolitical uncertainties and lower future rates.
OIL
Brent crude oil gained half a point to around $66.45 on Monday but later fell as markets reacted to prospects of three-way peace talks between the US, Russia, and Ukraine. Analysts note that reduced tensions could lead to the lifting of sanctions on Russian crude exports, allowing Russian oil to trade more freely on global markets. Combined with OPEC+ supply increases, oil prices have been trading 8% lower this month, ignoring 25% tariffs on Indian goods.
CURRENCY
The U.S. dollar index engulfed higher to close at 100 on the week's opening as markets digested developments from President Trump's pivotal summit with European leaders and the Ukrainian president, with Ukraine offering to purchase $100 billion worth of U.S. weapons as part of security guarantees. China's yuan traded in a narrow range while the offshore yuan held near nine-month highs, and the Hong Kong dollar strengthened to its strongest level since May amid rising interbank rates.
