FED: Jackson Hole: Analysts Mixed On Explicit Powell Cut Signal (2/2)
Further analyst views:
- Mizuho: “We expect Powell to disappoint the bullish sentiment in the market. We would be unsurprised if Powell’s Jackson Hole commentary is focused on the Fed’s framework review. That will have less of an immediate market impact but is more likely to be hawkish in tone, particularly relative to the framework change introduced at Jackson Hole in 2020.”
- Natixis: “We worry that the market may begin to fear Powell pushback or a result similar to the July FOMC– where (with aggressive market pricing) Powell is more neutral than dovish. That stance was possibly previewed by more cautious Fed-speak this week, including from traditionally dovish Austen Goolsbee.”
- Nomura: "we expect Powell will signal that policy easing is likely, without committing explicitly to a September rate cut or multiple rate cuts this year. .. Given that there is another round of monthly economic data between the Jackson Hole symposium and the September FOMC meeting, Powell is unlikely to telegraph what the Fed will do in September. In our view, this will leave the Fed on track to deliver the two 25bp cuts indicated in the March and June dot plots."
- SEB: "We expect Powell to acknowledge downside risks to employment but highlight that a slowing supply makes it harder to assess the state of the labour market. We believe that Powell will say that policy is data dependent and that the September decision will consider inflation and employment reports for August. "
- TD: “We expect Chair Powell will communicate the Fed's lean towards easing in September at Jackson Hole. Although there is still more data to come, we believe Powell will suggest that economic conditions support policy re-calibration. Downside risks to the labor market have grown, while tariff passthrough into inflation appears slower and more manageable than previously expected.”
- Wrightson ICAP: "We don’t expect any fireworks in Chair Powell’s Jackson Hole speech on Friday. His speech at last year’s conference confirmed the impending policy pivot in September 2024 when he said that “the time has come for policy to adjust” after more than a year of holding the funds rate target range steady at a cyclical peak of 5 ¼% to 5 ½%. This week’s underlying message may be similar in substance, but his phrasing is likely to be less assertive. He is likely to acknowledge (as he has done in the past) that the economic outlook may allow the Fed to cut rates over the remainder of the year, but we expect him to reiterate the importance of waiting for incoming data before judging what policy actions will be appropriate at next month’s meeting. While we think it is highly likely that the Fed will cut rates by 25 basis points in September, we don’t expect any strong signals from the Chair on Friday."
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AUDUSD TECHS: Support At The 50-Day EMA Remains Exposed
- RES 4: 0.6700 76.4% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6688 High Nov 7 ‘24
- RES 2: 0.6603 High Nov 11 ‘24
- RES 1: 0.6595 High Jul 11 and the bull trigger
- PRICE: 0.6545 @ 16:01 BST Jul 22
- SUP 1: 0.6455 Low Jul 17
- SUP 2: 0.6435 23.6% retracement of the Sep 9 - Jul 11 bull leg
- SUP 3: 0.6373 Low Jun 23 and a bear trigger
- SUP 4: 0.6357 Low May 12
The trend set-up in AUDUSD remains bullish. Support around the 50-day EMA, at 0.6492, has been breached, however, the pair has found support just below the average. A clear break of this EMA would highlight a stronger reversal and signal scope for an extension initially towards 0.6435, a Fibonacci retracement. Key short-term resistance has been defined at 0.6595, clearance of this hurdle would resume the uptrend.
TARIFFS: Trump Confirms Indonesia Trade Deal, 19% Tariff Rate
President Trump says on Truth Social that the US-Indonesia Trade deal is complete - he'd previously announced this deal last week, including the 19% tariff rate (was 32% on "Liberation Day")
@realDonaldTrump: ""It is my Great Honor to announce our Trade Agreement with the Republic of Indonesia, as represented by their Highly Respected President, Prabowo Subianto. It is agreed that Indonesia will be Open Market to American Industrial and Tech Products, and Agricultural Goods, by eliminating 99% of their Tariff Barriers. The United States of America will now sell American Made products to Indonesia at a Tariff Rate of ZERO, while Indonesia will pay 19% on all of their products coming into the U.S.A. — The Best Market in the World! In addition, Indonesia will supply the United States with their precious Critical Minerals, as well as sign BIG Deals, worth Tens of Billions of Dollars, to purchase Boeing Aircraft, American Farm products, and American Energy. This Deal is a HUGE WIN for our Automakers, Tech Companies, Workers, Farmers, Ranchers, and Manufacturers. Thank you for your attention to this matter. MAKE AMERICA GREAT AGAIN!"
ECB: GS See Risks Either Side Of Terminal View Of 1.75%
- Goldman Sachs write that "incoming data have been broadly consistent with the June ECB staff projections for resilient growth and further disinflation. That said, the ongoing trade tensions pose significant downside risks to the staff forecasts.”
- They there expect rates to be unchanged along with "limited shifts in communication" at this week's meeting ahead of the decision on Thursday.
- "In particular, the Governing Council is likely to note that the incoming data confirm the June projections and that it maintains its data-dependent policy approach.”
- “We expect President Lagarde to reiterate in the press conference that policy is in a good place but that the Council is ready to respond to changes in the economic outlook, emphasising the importance of the incoming data and trade policy developments.”
- “We maintain our forecast for a final cut to 1.75% in September given the re-intensification of EU-US trade frictions, our forecast for weak near-term growth (at home and abroad) and subdued inflation. While the ECB might hold rates at 2% if a favourable trade agreement is reached, we would expect further cuts beyond 1.75% under a 30% tariff rate than in our baseline.”
