Fed Chair Powell's September Rate Cut Signal Expected at Jackson Hole: Market Talk

Market Sentiment and Ukraine Peace Talks

• 🌍 Markets are exhibiting a wait-and-see approach this week due to holidays and a thin data diary, with anticipation building for Fed Chair Powell's remarks.
• 🕊️ President Trump's pledge to arrange a Russia-Ukraine meeting has led to a mixed market reaction, with some currencies like the Polish Zloty and Hungarian Forint rallying, while the Swiss Franc also shows strength.
• ⚠️ The market remains hesitant regarding the security guarantees for Ukraine, reflecting uncertainty about the US commitment.

UK Inflation and Bank of England Outlook

• 📈 UK inflation figures for July are expected to show sticky inflation, both headline and core, supporting the narrative of a hawkish Bank of England.
• 📉 The market is currently doubting the timing and speed of the Bank of England's next interest rate cut, potentially weakening Sterling.
• 💡 ING's forecast remains for a rate cut in November, a stance not yet priced in by the market.

Fed Minutes and Jackson Hole Symposium

• 📊 The upcoming Fed minutes might reveal FX volatility, particularly if there's evidence of dissent beyond the known two voters for a rate cut.
• 📉 However, the focus is shifting to Jackson Hole, where Fed Chair Powell's speech is anticipated to be the main market driver.

Powell's Potential September Rate Cut Signal

• 🔑 There's a good chance Powell will signal a readiness to cut rates in September, especially given recent weaker labor market data revisions.
• 📉 If Powell confirms the Fed's readiness to move in September, it could lead to another leg lower in the dollar, aligning with ING's expectation of three Fed rate cuts this year, compared to the market's pricing of just over two.