Week Ahead: Jackson Hole Symposium on the Radar

In addition to the Jackson Hole Symposium, an update from the Reserve Bank of New Zealand (RBNZ) and the minutes from the previous US Federal Reserve (Fed) meeting claim some of the limelight, as well as inflation data, and manufacturing and services S&P Global PMIs (Purchasing Managers’ Indexes).

Fed Chair Powell in the Spotlight

A considerable amount of interest will be on the Jackson Hole Symposium this week, and for good reason. The event takes place between 21 and 23 August, and reportedly, there is so much media heading there that there is not enough room; however, do not quote me on this!

As you can imagine, a rather large spotlight will be on the Fed Chairman Jerome Powell at Jackson Hole. The Fed Chief is expected to take the stage on Friday at 10 am EDT (2:00 pm GMT), where market participants will be closely monitoring his language regarding a timeline for policy easing. His speech will likely be no longer than 15 minutes, if last year’s address is anything to go by.

Although it is impossible to know what Powell will say, he may use the stage to underscore the Fed’s independence. Whatever the case may be, this will be a widely observed affair and could prove market-moving for major asset classes.

Ahead of the Jackson Hole Symposium, we’ll also get the minutes from the previous Fed meeting on Wednesday, which saw the central bank decide to leave the funds target rate on hold at 4.25% – 4.50%. You will recall that the previous meeting also witnessed two Governors dissent – Christopher Waller and Michelle Bowman – which was the first time two Governors dissented since the 1930s.

Following a disappointing July payrolls report that showed some very chunky downside revisions to the data – and ultimately saw the commissioner of the Bureau of Labor Statistics (BLS), Erika McEntarfer, fired by US President Donald Trump who claimed the data was ‘rigged’ – money markets have now all but fully priced in a 25-basis point (bp) Fed rate cut for September.

Traders will be closely watching the minutes for more insight into the future rate-cut trajectory, following CPI inflation (Consumer Price Index), largely coming in line with market estimates, and wholesale inflation (PPI [Producer Price Index]), considerably beating expectations. Nevertheless, no one knows the full extent of tariff-induced inflation at this point. Still, the slowdown in the labour market data, as noted above, firmly swung the pendulum in favour of easing policy next month.

Of course, if Powell leans more dovish this week, expect the US dollar (USD) and US Treasury yields to trade lower, with Stocks and Spot Gold (XAU/USD) to catch a bid. Conversely, a hawkish picture may prompt the opposite impact.

RBNZ Gearing Up to Cut Rates

Alongside the majority of economists polled by Reuters, markets are almost fully pricing in a 25-bp rate cut for the RBNZ on Wednesday. This would take the cash rate from 3.25% to 3.00%. For the year-end, 42 bps worth of cuts are currently priced in, meaning another rate cut could be seen this year.

Since the last meeting – which saw the central bank emphasise the possibility of further easing, should price pressures continue to trend lower – inflation ticked higher to 2.7% in Q2 25. Although up from 2.5% in Q1, inflation remains within the central bank’s 1% – 3% target band, where it has remained for four successive quarters. In addition to the above, though, inflation expectations ticked lower to 2.28% for the next two years in Q3 25, down from 2.29% in Q2, along with cooling economic activity and a loosening jobs market.

Ultimately, with a rate cut baked in, attention falls on forward guidance. A hawkish scenario, one that should underpin a bid in the New Zealand dollar (NZD), could occur if the central bank indicates a high bar for further policy easing. This may materialise if the RBNZ lacks confidence regarding the trajectory of inflation and when it will hit its highest point. On the other hand, a dovish scenario, which could be NZD negative, may see policymakers suggest rate cuts at subsequent meetings; you may even see the central bank put more weight on the growth and inflation picture, and disregard the short-term inflation path.

Inflation Numbers Eyed

UK CPI inflation data will be released on Wednesday. This follows on the heels of a hawkish Bank of England (BoE). In a closely contested 5-4 MPC vote (Monetary Policy Committee), the BoE decided to reduce the bank rate by 25 bps from 4.25% to 4.00%.

This followed its first-ever vote recast due to MPC member Alan Taylor voting for a chunkier 50-bp rate cut, which forced a revote. Ultimately, Taylor settled on 25 bps. The BoE also now sees inflation settling at 4.0% in Q3 25, double the central bank’s inflation target.

This also follows a better-than-feared growth picture, with Q2 25 GDP data (Gross Domestic Product) showing that the economy grew by 0.3% according to the preliminary report, putting the timeline for when the BoE would ease policy in question. However, despite bettering expectations of a 0.1% gain, the rise in economic growth came mainly from government expenditure, and it was slower than Q1 data (0.7%).

Ultimately, the question is whether the BoE will cut again this year. Markets are uncertain, pricing in just 15 bps worth of cuts for the year-end. It is important to remember that the central bank is still signalling a cautious/gradual easing approach and underscored that rates remain in restrictive territory. However, I think the BoE will have more conviction in cutting this year if inflation eases, placing attention on the July inflation report this week, which could open the door to solid moves in the British pound (GBP) this week.

Service sector inflation will be important in this report, which has been sticky. We will need to see something here to move the BoE’s dial, I feel. YY services inflation is expected to have ticked higher to 4.8%, up from 4.7% in June; the estimate range, however, spans a high of 5.0% and a low of 4.7%. Anything at or, preferably, below the lowest estimate will get attention and possibly nudge the GBP lower.

To achieve a new cycle low, however, we would need a low that surpasses the December 2024 reading of 4.4%. As for the YY headline level, the median estimate suggests inflation has increased by 3.7%, up from 3.6%, while YY core inflation is forecast to remain unchanged at 3.7%. Should we see broad softening across the board here, this will likely move investors to fully price in another rate cut this year, weighing on the GBP/Gilt yields.

Additional Data on the Docket

Tuesday 19 August

Canadian YY CPI inflation rate for July at 12:30 pm GMT

Early estimates show headline CPI inflation to have risen by 2.0% in July, down from 1.9% in June. This follows the BoC holding its overnight rate steady at 2.75% for a third consecutive meeting, with markets now pricing in just under one more 25-bp rate cut this year.

Thursday 21 August

Eurozone, UK and US (flash) manufacturing and services PMIs for August at 8:00 am, 8:30 am and 1:45 pm GMT, respectively

Global PMIs can often increase volatility, affecting major asset classes, including currencies, equities, bonds, and commodities.

Friday 22 August

UK MM retail sales data for July at 6:00 am GMT

As a key gauge of consumer spending, the July UK retail sales data will be closely watched, with expectations of a 0.3% gain following a 0.9% rise in June.

Written by FP Markets Chief Market Analyst Aaron Hill

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