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The Week Ahead – Jackson Hole, FOMC Minutes, Bond Yields

jeffriess
August 19, 2019
by Joseph Jeffriess, Market Analyst

Stocks ended the week continuing their rebound, U.S indexes finished the week with 1%+ gains. After what was becoming a horror week buyers returned cutting weekly losses in half after yields bounced back from record lows. Risk currencies had a mixed week, the AUD finished flat after cutting back losses, the GBP had a solid week adding 105 pips breaking 4-weeks of declines. The EUR ended the week 108 pips lower after the ECB news worried buyers mid-week.

This week traders will continue to monitor bond yields and maintain a focus on continuing trade stoush between the U.S and China. On top of these events traders will be looking to;

Jackson Hole. On Friday and Saturday, Fed officials will be meeting at the Jackson Hole Wyoming, for the annual summit. Markets want to know whether the Fed is in a serious longer-term cutting cycle, or just planning a few cuts as an insurance policy against an economic downturn. Powell’s speech at Jackson Hole this Friday is expected to be the main event of the week, and is expected to be a tough communications challenge for the Fed chair.

FOMC Minutes. Thursday morning the market will be looking to the FOMC meeting minutes. Traders will be looking to gauge the strength of support for the last rate cut which was the first move lower since 2008. Powell commented that is was a “mid-cycle adjustment,” rather than the start of a major easing cycle. The decision to cut rates wasn’t unanimous, two Fed members voted against the cut due to the strengh of the economy. Looking at what’s been playing out in the bond market could insurance rate cuts evolve into a full easing cycle?

Yields. Last week some yields dropped to record lows sending shock waves through equity markets. The current trade dispute has contributed to falling yields. Friday’s sessions saw some recoveries with the 10-year and 30-year moving off shock lows. President Trump commented that he thinks the trade dispute will be relatively short and that China wants to make a deal. Traders will continue to watch yield movements this week as certain levels start to support recession fears.

Other key data;

Tuesday – 11:30 am RBA Monetary Policy Meeting Minutes. Wednesday 10:30 pm Canadian CPI. Thursday – 5:15 pm French Flash Services PMI, 5:30 pm German Flash Manufacturing PMI, German Flash Services PM. Friday – 8:45 am New Zealand Retail Sales, 10:30 pm Canadian Retail Sales.

Good trading from Eightcap.
All times are AEDT.