Morning Brew August 26 2022
Senior Relationship Manager
Summary: Powell in Focus
Today all focus will be on the speech of Jerome Powell at 16:00 CET at the Jackson Hole conference.
Despite the hawkish tones from various officials (see below) , risk sentiment remains fairly strong on what seems to be confidence that the Fed will lower rates quickly once inflation is under control and the expectation remains that to be the case early Q2 2023.
Any change to that sentiment will cause spikes in the markets, for now all else seems to fade to the background.
Some Key comments from fed Speakers:
James Bullard: 3.75 -4% IS MY TARGET FOR THIS YEAR, MY BASELINE IS THAT INFLATION WILL BE MORE PERSISTENT THAN WHAT MANY EXPECT
Raphael Bostic: "Some weakening is to be expected, it's going to be really important that we resist the temptation to be too reactionary, and really make sure that we get inflation well on its way to 2% before we take any steps to increase accommodation in our policy stance."
Patrick Harker "I don't see the risk of a sustained or deep recession to be very high,"
Esther George "The labor market is very tight ... I suspect to get some loosening in that labor market you will see higher unemployment"
Equities gained across the board yesterday with the Nasdaq strongest at +1.67% and the USD Index holds at 108.60 while Yields remain near 3%.
The GfK conducted a survey of around 2,000 Germans, and the confidence Index fell to -36.5, falling even lower then the record last month. I am not sure if this is not exaggerated,
The cost of energy for British consumers can rise by 80% from October, regulator Ofgem announced, taking the average annual household cost to 3,549 pounds.
GBPUSD is testing the 1.18, EURUSD is at 0.9964, XAUUSD at 1757 and Silver 19.27.
In terms of economic data we expect the US PCE at 14:30 and the Michigan confidence at 16:00
Physically Settled Futures:
Henry Hub Natural Gas (NGU2) will expire 26th Aug at 19:30 GMT
10 Year Government of Canada Bond (CGBU2) will expire 29th Aug at 15:00 GMT
Long Gilt (FLGU2) will expire 29th Aug at 15:00 GMT
Dutch TTF Gas (TTFMU2) will expire 29th Aug at 9:00 GMT
10YUSTNOTESEP22, COPPERUSSEP22, CORNSEP22, GASOLINEUSSEP22, HEATINGOILSEP22, SILVERSEP22, SOYBEANOILSEP22, SOYBEANSSEP22, WHEATSEP22 will expire 29th Aug at 15:00 GMT