The Jackson Hole Symposium wrapped up this weekend and the overarching message is that interest rates cuts are coming and the fabled “soft landing” is within reach. Inflation has apparently been tamed and the labour market didn’t even need to be sacrificed in order to do so. The narrative was laid out quite clearly by Jerome Powell of the Federal Reserve, who claimed “the time has come for policy to adjust”. A sentiment echoed by Andrew Bailey of the Bank of England and a number of ECB members. That’s that then. Done and dusted.
Of course, those familiar with economic data publications will be forgiven for remaining sceptical. Jobs numbers can be revised, growth figures can be tweaked once attention has moved elsewhere. Entire recessions can be declared retroactively. As economics departments begin to boast of 2% inflation rates and robust unemployment stats, it is worth keeping such declarations of victory in mind during the weekly food shop.
The Fed all but greenlighting a September rate cut prompted the Dollar to take a predictable hammering on Friday, the DXY falling to 100.67 after a 0.8% drop. The Pound shot straight up to $1.32, the Euro tapped $1.12 before a slight retreat and the Yen dragged itself back down to the 144 level. Although gold failed to achieve a new record high on Friday, the precious metal also profited from the weakness in the Dollar to close the week above $2,500 an ounce once again.
The first half of this week is once again pretty sparse as far as the economic calendar is concerned. One potential market driver over the next few days is the developing conflict in the near east as Israel and Hezbollah exchange blows.
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