Aurelia Butler

Powell signaled that the Fed is now prepared to lower interest rates, aligning with market expectations for a series of rate cuts. His remarks suggest that the Fed’s dual mandate of price stability and maximum employment is increasingly skewed towards supporting the labor market, even as inflation trends towards the Fed’s 2% target.During the speech, Powell did not push back against market expectations of multiple rate cuts.“The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,” he said.While he was not more dovish than the market, Powell “didn’t utter any hawkish views whatsoever to alter the market’s dovish expectations for several rate cuts,” strategists at Yardeni Research said in a note.The federal funds rate (FFR) futures market currently indicates a total of 100 basis points in cuts, bringing the rate down to 4.25% by year-end. Projections suggest the FFR could decrease further to 3.00% by the end of next year.However, Yardeni strategists believe Powell’s comments on Friday may have been “overly” dovish, and that his latest pivot “won’t be his last.”They note that while inflation has been trending downwards, it may not be wise to ease policy too quickly, especially with the labor market remaining relatively strong.Powell’s emphasized that “upside risks to inflation have diminished,” while “the downside risks to employment have increased.” ​​This reflects the Fed’s view that the labor market, which has cooled from its previously overheated state, is now a greater concern than the possibility of inflation reaccelerating.But should inflationary pressures resurface, it could leave the Fed vulnerable, according to Yardeni.The strategists point out that just a month ago, Powell was emphasizing the need to maintain a restrictive policy stance to keep demand in line with supply and to manage inflationary pressures.At that time, Powell mentioned the Fed’s dual mandate of price stability and maximum employment repeatedly, indicating a balanced approach. In contrast, at Jackson Hole, Powell mentioned the mandate only twice, placing greater emphasis on the need to support the labor market.However, that stance could require yet another pivot from Powell and the Fed if economic conditions change again, Yardeni strategists cautioned.“In our opinion, Powell was too dovish on Friday, needlessly so, because the labor market has simply normalized after pandemic-related effects rather than cooled in response to economic weakness,” they wrote. More

$75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

$75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

Your browser does not support playing this file but you can still More

$75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

$75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

TOKYO (Reuters) – The yen rose to a three-week high against the dollar on Monday as Federal Reserve Chair Jerome Powell’s emphatic dovish shift contrasted sharply with Bank of Japan chief Kazuo Ueda’s steadfastly hawkish tone. The U.S. currency hovered near its lowest in 13 months against the euro. It also sagged closer to levels last seen in March 2022 versus sterling, with Bank of England head Andrew Bailey’s comments that it was “too early to declare victory” over inflation signaling a less aggressive stance on interest rate cuts than the Fed. The dollar sank as much 0.59% to 143.56 yen for the first time since Aug. 5 in the early hours of Monday before last trading down 0.25%.Sterling was steady at $1.3215 after jumping as high as $1.32295 on Friday for the first time in 17 months.Although Fed officials had sounded increasingly dovish in the lead up to the Fed’s annual Jackson Hole symposium, Powell on Friday “used stronger language” than his peers when delivering his keynote speech, said Tapas Strickland, head of market economics at National Australia Bank (OTC:NABZY).”Importantly, there was a notable absence of caveats such as ‘gradual/gradualism’,” which “is likely what excited markets,” Strickland said.Over in Asia, BOJ’s Ueda, who spoke in parliamentary testimony earlier on Friday, “stuck to the script of the BOJ needing to adjust the degree of easing – central bank-speak for a further increase in the policy rate from a low level – and he played down the significance of the July rate hike on market turmoil,” Strickland said.Many market participants anticipated Ueda might strike a less hawkish note in the special session of parliament, which was called amid criticism the surprise hike last month helped spark a rapid unwind of bearish yen bets and aggressive sell-off of Japanese stocks. The dollar index – which measures the currency against a basket of six major peers, including the euro, sterling and yen – languished at 100.64, just off the 13-month low of 100.60 reached at the end of last week.The euro was little changed at $1.1190, not far from its Friday high of $1.1201, a level last seen in July of last year. That’s despite sources telling Reuters that European Central Bank policy makers are lining up behind another rate cut on Sept. 12.Traders unanimously expect the Fed to kick off its loosening campaign on Sept. 18, but see 36.5% odds of a super-sized 50-basis point reduction, according to the CME Group’s (NASDAQ:CME) FedWatch Tool. That’s up from 25% odds a week earlier.Elsewhere, the Australian dollar eased 0.1% to $0.6790, but still remained close to Friday’s peak of $0.67985, the highest level since July 11.The Chinese yuan ticked up slightly to 7.1130 per dollar in offshore trading, the strongest level since Aug. 5.Leading cryptocurrency bitcoin added 0.9% to $64,271.60. More

SYDNEY (Reuters) – Asian shares crept cautiously higher on Monday, while the dollar and bond yields were on the wane ahead of inflation data that investors hope will pave the way for rate cuts in the United States and Europe.Oil prices climbed 0.7% after Israel and Hezabollah traded rocket salvos and air strikes on Sunday, stirring worries about possible supply disruptions if the conflict escalated. Brent rose 51 cents to $79.53 a barrel, while U.S. crude added 50 cents to $75.33 per barrel. [O/R]Investors are also anxiously awaiting earnings from AI darling Nvidia (NASDAQ:NVDA) on Wednesday to see if it can match the market’s uber-high expectations.The stock is up some 150% year-to-date, accounting for around a quarter of the S&P 500’s 17% year-to-date gain.”Nvidia will beat consensus expectations, they always do, but investors are so ingrained in seeing revenue come in $2 billion plus above the analysts’ consensus or we could easily see a sell the news event,” said Chris Weston, head of research at broker Pepperstone.That means Nvidia would have to report sales of $30 billion or more and guidance for Q3 of $33 billion or above, he added.Early Monday, S&P 500 futures and Nasdaq futures were down 0.1%. [.N]MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.4%, after rising 1.1% last week, while South Korea rose 0.3%.Japan’s Nikkei eased 0.7% as a stronger yen pressured exporter stocks.The yen had jumped on a broadly weaker dollar on Friday after Federal Reserve Chair Jerome Powell said the time had come to start easing policy and emphasised that the central bank did not want to see further weakening in the labour market.”Importantly there was a notable absence of caveats such as ‘gradual/gradualism’ as used by other Fed officials,” noted Tapas Strickland, head of market economics at NAB.”The jobs report on September 6 is clearly important as Powell is willing to cut rates to ward off downside risks to employment and to maintain a strong labour market,” he added. “In summary, Powell has increased the chances of a soft landing.”LOTS OF CUTS COMINGFigures on U.S personal consumption and core inflation are due on Friday, along with a flash reading on European Union inflation. Analysts generally assume the data will be benign enough to allow for rate cuts in September.Fed fund futures are fully priced for a quarter-point cut at the Sept. 18 meeting, and imply a 36% chance of an outsized move of 50 basis points. The market also has 103 basis points of easing priced in for this year and another 122 basis points in 2025.”We continue to expect the FOMC to deliver an initial string of three consecutive 25bp cuts at the September, November, and December meetings,” said analysts at Goldman Sachs.”Our forecast rests on our assumption that the August employment report will be stronger than the July report, but we continue to think that if instead the August report is weaker than we expect, then a 50bp cut would be likely.”Markets are also fully priced for a quarter-point cut from the European Central Bank next month, and a total 163 basis points of easing by the end of 2025.Yields on two-year Treasuries stood at 3.91%, having fallen almost 10 basis points on Friday, while 10-year yields held at 3.79%. [US/]The dollar slipped a further 0.3% to 143.97 yen, having fallen 1.3% on Friday. The euro was up at $1.1190 and just off a 13-month top, while the Swiss franc held firm at 0.8472 per dollar. [USD/]A softer dollar combined with lower bond yields to underpin gold at $2,516 an ounce, and near an all-time peak of $2,531.60. [GOL/] More