Morning Brew August 22 2025

Good Morning

The US PMI and Existing Home Sales were higher than expected, and Cleveland Fed President Hammack stated that current conditions don't support a September rate cut. This caused US yields to rise and the USD Index to jump higher: the 30s are at 4.91 and the 10s at 4.32. The USD Index rose to 98.82, EURUSD fell below 1.16 to 1.1585, GBPUSD is at 1.3390, and USDJPY is at 148.75. The UK's order book balance fell to -33 in August 2025, below the expected -28.

Gold and Silver are at 3330 and 38.05 respectively. Bitcoin and Ethereum are at 112,700 and 4,270. Indexes are off: S&P by 0.4%, Nasdaq by 0.34%, and Dow by 0.34%. Walmart was a loser after it beat revenue expectations but missed the profit forecast, dropping 4.5%. Coty missed expectations as well and slumped 21%. Google made a six-year cloud computing deal with Meta Platforms worth more than $10 billion.

Most curious is the tiny trading volume, which shows a lack of inspiration: the 20-day moving average is at 17 billion shares traded on US exchanges, whereas yesterday the volume was only 12.3 billion.

The importance assigned to the Powell speech seems a bit over the top to me, but let us see. Heading into the event, traders are pricing a September rate cut at 75 BPS, and the December rate is seen down 50 BPS from current levels. The key question in his speech is expected to be whether he stresses inflation or the weak labor market. If he focuses on central bank independence, it could be regarded as hawkish, as Donald Trump would clearly like to see more cuts sooner.

As we observe in the small volumes and little bargain hunting, traders are on edge, and this calls for proper risk management:

• Adjust position sizes where necessary.
• Volatility is fairly low, and using options to hedge may be worth the expense.
• Stops and trailing stops may be useful.
• Diversification can help reduce risk if properly done.

Basically, make sure you are comfortable with the risk you carry into an event that seems to draw more attention than it warrants. As nothing else is on the agenda at the time, all focus will be on Mr. Powell.

Trade safely

Friday, August 22

• Germany GDP
• UK Retail Sales